Subcontractor Labor Cost Calculator
Calculate the total cost of hiring a subcontractor, including base hourly rate, hours worked, overhead burden, markup percentage, and applicable payroll taxes.
Formula
Base Labor Cost (per worker) =
(Regular Hours × Hourly Rate) + (Overtime Hours × Hourly Rate × 1.5)
Payroll Tax Cost = Base Labor Cost × Payroll Tax Rate
Burdened Labor Cost = (Base Labor Cost + Payroll Tax Cost) × (1 + Overhead Rate)
Total Before Markup = Burdened Labor Cost × Number of Workers
Grand Total = Total Before Markup × (1 + Markup Rate)
Effective Billing Rate = Grand Total ÷ (Total Hours × Workers)
Assumptions & References
- Overtime is calculated at 1.5× the base hourly rate per the Fair Labor Standards Act (FLSA) for hours over 40/week.
- The default payroll tax rate of 15.3% reflects the combined employer + employee share of FICA (Social Security 12.4% + Medicare 2.9%); adjust for FUTA (0.6%) and SUTA as applicable.
- Overhead burden covers indirect costs such as insurance, tools, vehicle use, administrative expenses, and benefits — typically 20–40% for contractors.
- Profit markup is applied to the fully burdened cost and typically ranges from 10–25% depending on project type and market conditions.
- This calculator assumes the subcontractor is classified as an employee. For 1099 independent contractors, payroll taxes may not apply — consult IRS Publication 15-A.
- References: IRS Publication 15 (Employer's Tax Guide), FLSA overtime rules (29 CFR Part 778), AGC of America overhead benchmarks.