Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Tutoring
  • Home
  • Law, Transactions, & Risk Management
  • HR, Employment, Labor, & Discrimination

Burden Rate - Explained

What is Burden Rate?

Written by Jason Gordon

Updated at April 16th, 2022

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Professionalism & Career Development
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

Table of Contents

What is Burden Rate (Costs)?What Makes up the Burden Rate?Academic Research on Burden Rate

What is Burden Rate (Costs)?

Indirect costs related to employees beyond gross compensation or payroll costs is the burden rate. The labor burden is the dollar amount for every dollar of wages. For instance, a burden rate of $1.00 means that you are spending $1.00 on every dollar paid in gross wages on the costs of indirect labor. The burden rate includes typical costs such as health insurance, paid leave, travel and training expenses, vacation, sick leave, workers compensation, and payroll tax. The burden rate provides a more accurate view of the labor total costs than just viewing payroll costs by themselves.

Back To: MANAGEMENT

What Makes up the Burden Rate?

Much of the time, the costs of the burden rate are hidden. There are times when overall cost of labor is as much as 50% more than just the payroll costs by themselves. To gain an accurate view of the profitability the burden rate must accurately be calculated. Only the employees costs that are above and beyond compensation or salary make up the burden rate. These are the hidden costs of maintaining an employee. Additional benefits, paid leave, and legally mandated insurance are additional liabilities included in the burden rate. The state the business operates in and the federal government require burden rate expenses such as payroll taxes, Medicare, Social Security, unemployment, and workers compensation. Other mandatory expenses such as offerings of health care may be required to be offered to every employee if a business is over a specific size. The location of the business may incur additional job training or local payroll taxes also. The required burden costs are calculated to make a determination of where certain businesses will operate. Locations can become more or less attractive as costs vary significantly from one state to another. Burden costs may include other benefits offered to employees such as flexible spending accounts, retirement benefits, dental care, prescription drug care, vision care, and base health care offerings that are not required for the company to provide to a particular employee. Burden of cost calculations must also include cellphones or vehicles used for business by employees. Other services that must also be included in the calculations include wellness activities, beverage or food offers, business lodging for trips, training costs, and uniforms that are required. 


burden rate cost of an employee

Was this article helpful?

Yes
No

Related Articles

  • Cash Balance Plan - Explained
  • Fair Labor Standards Act ( FLSA ) - Explained
  • Blackout Period (Investment Plan) - Explained
  • Benefit Allocation Method - Explained



©2011-2023. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand