What Is True Burden of Cost for Nevada Contractors?
This is a detailed look at a concept that you probably already understand but not sure how to implement for your business’s growth. Ever wonder why your bids feel tight even when you think you priced everything right? You’re not alone. Many Nevada contractors struggle with this because they don’t account for their true burden of cost.
Your burden isn’t just wages. It’s all the extra costs that come with running your business—taxes, insurance, benefits, tools, trucks, office rent, and even downtime. If you ignore these, you’re leaving money on the table and risking your profit. Listen, it is important to take the time to do some financial calculations to set an hourly rate that is true to the total cost of bidding and operating successfully.
In this guide, we’ll break down what burden really means, why it matters, and how to calculate it step by step. No accounting degree required—just plain language and practical tips for small contractors in Reno and Northern Nevada.
Your company’s true burden of cost is the real price of having an employee on your team—not just their hourly wage.
Think of it like this: If you pay a carpenter $30/hour, that’s not the full story. Add payroll taxes, workers’ comp, health insurance, paid time off, and overhead like trucks and tools. Suddenly, that carpenter might cost you $54/hour.
If you bid jobs based only on wages, you’re underbidding every time. That’s why understanding burden is key to staying profitable.
Why True Burden of Cost Matters in Your Bids
When you miss these hidden costs, your bids look competitive—but your profit disappears.
Example: You bid a job assuming labor costs $30/hour. The job takes 100 hours, so you budget $3,000 for labor. But your real cost is $54/hour. That’s $5,400! You just lost $2,400 before buying materials.
Accurate burden means smarter bids, better margins, and fewer surprises.
Safety First! Tailgate safety meetings are critical to put the crew into a safe-practice mindset.
What Goes Into Your Company’s Burden Rate?
Here’s what you need to include:
- Employer’s Portion of Payroll taxes: Social Security + Medicare + unemployment (FUTA/SUTA).
- Workers’ comp insurance: Required in Nevada.
- Benefits: Health insurance, retirement, paid time off.
- Tools and equipment: Power tools, safety gear, small tools.
- Vehicles: Trucks, fuel, maintenance.
- Office overhead: Rent, utilities, admin salaries, software.
- Training and safety costs: Certifications, OSHA compliance.
If you skip any of these, your burden calculation will be off—and so will your bids.
Don’t forget to check with C & M Bookkeeping for more details on the accounting of these items.
Billable Hours vs Total Hours (and Why It Matters)
Here’s a concept many contractors miss: Not every hour you pay is billable.
- Total hours: All hours your employee works—job site, training, meetings, downtime.
- Billable hours: Hours you can charge to a client.
If your crew works 2,000 hours a year but only 1,600 are billable, you need to spread your costs over 1,600 hours—not 2,000.
This is called utilization adjustment. It accounts for non-billable time so your burden rate reflects reality. This is a good place to talk a little more about utilization adjustment.
Understanding Utilization and How to Estimate Yours
What is Utilization?
Utilization is the percentage of an employee’s total working hours that are billable to a client. It measures how much of your team’s time actually earns revenue versus time spent on training, meetings, travel, or downtime.
Why It Matters:
Profit Protection. If you assume 100% of your crew’s hours are billable, you’ll underprice every job. Most contractors average 65%–85% utilization, depending on trade and season.
How to Estimate Your Company’s Utilization Rate:
- Start with total hours worked per year:
Full-time = 2,080 hours per employee.
Example: 5 employees × 2,080 = 10,400 hours. - Calculate billable hours:
Track actual job-site hours billed to clients.
Example: If your team bills 7,800 hours, that’s your billable total. - Divide billable hours by total hours:
- Utilization Rate = Billable Hours ÷ Total Hours
Example: 7,800 ÷ 10,400 = 75% utilization.
Industry Benchmarks:
- General contractors: 65%–85%
- Specialty trades (electrical, plumbing): often higher
- Office/project management roles: 80%–95%
Tip: Use 75% as a starting point if you don’t have data yet, then refine as you track real numbers.
You might be asking, what about paid holidays and other PTO (Paid Time Off ), as well as paid vacations, and the other profit killer…Overtime pay.
This is a good point to talk about this part of your company’s utilization percentage. It requires a look historically, if you have these accounting records. If not, the following example hopefully will clear this concept up for you.
How Big Contractors Handle — Overtime, PTO, Holidays and Other Non-Job-Hours
- Include Paid Non-Working Hours in Labor Burden
- They calculate the true hourly cost by spreading annual wages (including overtime, PTO, holidays) across billable hours, not total hours.
- Example: If an employee earns $60,000/year including overtime and PTO, and only 1,600 hours are billable, the base hourly cost is $37.50 before adding taxes and benefits.
- Add Benefits and Payroll Taxes
- Health insurance, retirement, workers’ comp, and employer taxes are added to the hourly rate.
- Apply Utilization Adjustment
- Utilization accounts for the fact that employees are paid for 2,080 hours (or more with overtime), but only a portion is billable.
- Paid holidays, PTO, and training time reduce billable hours, so the hourly rate is adjusted upward to cover those costs.
How to Calculate Your True Burden of Cost Step by Step
Ready to crunch the numbers? Here’s the simple process:
Step 1: Add Up Labor Costs Beyond Wages
Start with payroll taxes, workers’ comp, benefits, and other employee-related costs. Example:
- Base wage: $30/hour
- Payroll taxes: $3/hour
- Workers’ comp: $2/hour
- Health insurance: $4/hour
Labor burden = $3 + $2 + $4 = $9/hour
Labor cost before overhead = $30 + $9 = $39/hour
Step 2: Add Annual Overhead
Office rent, utilities, admin salaries, trucks, tools—everything that keeps your business running. Example:
- Annual overhead: $120,000
Step 3: Calculate Billable Hours
Estimate total billable hours for your crew. Example:
- 5 employees × 1,600 billable hours = 8,000 hours
Step 4: Allocate Overhead
Divide overhead by billable hours: $120,000 ÷ 8,000 = $15/hour
Step 5: Add It All Up
Fully burdened rate: $30 (wage) + $9 (labor burden) + $15 (overhead) = $54/hour
That’s your real cost per hour—not $30.
How to Apply Your Fully Burdened Rate
Once you calculate your fully burdened rate (e.g., $54/hour), here’s how to use it:
What It Means
$54/hour is the true cost per billable hour for one worker, including wages, taxes, benefits, overhead, and utilization adjustment.
How to Use It
You price jobs based on total man-hours required, not just the number of workers.
- Example 1: One Worker
- Job requires 100 hours.
- 100 × $54 = $5,400 labor cost.
- Example 2: Multiple Workers
- 3 workers × 8 hours/day × 5 days = 120 man-hours.
- 120 × $54 = $6,480 labor cost.
Tip: Always calculate based on total man-hours for the scope of work.
Should You Use One Rate or Multiple Rates?
When you calculate your fully burdened rate (like $54/hour), you might wonder:
Do I use one average rate for all employees, or calculate separate rates for each role?
Using One Average Rate
For small contractors with crews earning similar wages, using a representative base wage (e.g., $30/hour) is common. It simplifies estimating and still protects profit when combined with burden and overhead adjustments.
When to Use Multiple Rates
If your team has wide pay differences—like a $20/hour laborer and a $50/hour foreman—calculate separate fully burdened rates for each role. This gives you more accurate job costing, especially for large or mixed-skill projects.
Bottom line:
- Small crews with similar pay? One rate is fine for quick estimates.
- Larger or varied crews? Use multiple rates for precision.
Common Mistakes Small Contractors Make
- Ignoring non-billable time: Training, meetings, downtime.
- Using outdated insurance rates: Premiums change—update yearly.
- Not adjusting for seasonal slowdowns: Winter work in Nevada can drop utilization.
- Guessing overhead: Track actual costs, don’t estimate.
Best Practices for Small General Contractors in Nevada
- Update burden rates yearly: Costs change—stay current.
- Track actual vs estimated costs: After each job, compare numbers.
- Use software or spreadsheets: Automate calculations to avoid errors.
- Cover non-billable time fully: Include training and admin tasks in your math.
How Knowing Your Burden Helps You Win More Profitable Jobs
When you know your true cost:
- You bid smarter.
- You protect your profit.
- You build trust with clients because your pricing is consistent and fair.
Conclusion
Your true burden of cost isn’t just a number—it’s the key to running a profitable contracting business in Nevada. Start calculating today, and you’ll see the difference in your bottom line.
Want a simple way to do this? To download our Free Microsoft Excel Burden Calculator for Nevada Contractors, fill out this form and say, Free Burden Calculator please. I will send it to your inbox as soon as possible.
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