What is the payroll burden rate?

Payroll burden rate represents the additional employer costs beyond gross wages, expressed as a percentage. This includes employer payroll taxes, health insurance, retirement contributions, workers' compensation, and other benefits. A typical burden rate runs 20% to 35% of wages. For professional service firm owners, knowing your burden rate reveals the true cost of employees and enables accurate project costing.

Key characteristics

• Employer costs above wages

• Expressed as a percentage

• Varies by benefits offered

• Affects project profitability

• Needed for pricing decisions

• Updates with benefit changes

Why it matters for professional service firms

That $80,000 salary actually costs you $100,000 or more. Ignore the burden rate, and your project margins are fiction. Every pricing decision, hiring choice, and profitability calculation needs the true loaded cost. Underestimating burden is a common mistake that erodes margins quietly.

Real-world example

Tom employed a senior consultant at a $95,000 salary. Burden breakdown: FICA $7,268 (7.65%), health insurance $8,400, 401k match $2,850 (3%), workers comp $475, state unemployment $380. Total burden: $19,373. Burden rate: 20.4%. True annual cost: $114,373. When pricing projects, Tom used a $55/hour cost ($114,373/2,080 hours), not the $45.67 based on salary alone.