What is the all-in labor cost?

All-in labor cost captures the complete cost of an employee, including salary, payroll taxes, benefits, training, equipment, and allocated overhead like office space and software. It answers: What does this person really cost the firm? For professional service firm owners, all-in labor costs are essential for accurate project pricing and profitability analysis.

Key characteristics

• Complete employee cost

• Includes overhead allocation

• Beyond just salary and burden

• Used for pricing decisions

• Varies by role and location

• Recalculated annually

Why it matters for professional service firms

Salary plus benefits is not the whole story. Add the laptop, software licenses, office space, training, and recruiting costs. An $80,000 employee might cost $120,000 all-in. Use salary for pricing, and you are giving away margin. Use all-in cost, and you price for actual profitability.

Real-world example

Rachel calculated the all-in cost for a consultant earning $85,000. Burden (22%): $18,700. Allocated overhead (desk, software, phone, training): $12,000. Recruiting cost amortized over 3 years: $4,000. All-in annual cost: $119,700. Hourly cost assuming 1,800 productive hours: $66.50. Her billing rate of $175/hour suddenly made more sense, gross margin per hour: $108.50, or 62%.