If you run a home service company and price your jobs by time and material, you're likely leaving money on the table. Worse, you might be losing money on every job without even knowing it.

The burden rate is the fix to that problem. Here is how to calculate yours.

What is a Burden Rate?

A burden rate is the true hourly cost of putting one technician on a job. It is everything it costs your business to keep that technician working.

A lot of owners only think about the hourly wage when pricing a job. However, a tech making $35 an hour might actually cost your business $85 to $110 an hour once you add up overhead. That gap is exactly what the burden rate captures.

The Burden Rate Formula:
{Burden Rate} = {Total Annual Business Costs} \ {Total Annual Billable Hours}

Why Knowing Your Burden Rate is Critical

Without this number, your pricing is just a guess. Once you know your true burden rate, you can:

Build flat-rate prices that actually cover your costs instead of hoping for the best.
Set commission structures that reward your techs while increasing your profit.
Know the exact breakeven point a job needs to hit before it becomes profitable.
Stop losing money on small jobs that look fine on paper but lose money in reality.

The Danger of Ignoring It

When you don't know your burden rate, you undercharge. You pay out commissions that eat into hidden margins, hire new techs only to watch your financial numbers get worse, and give bids on large projects that barely cover your basic expenses.

What Goes Into a Burden Rate Calculation?

To get an accurate number, you must look at every expense required to keep your team running for the year:

Tech Wages: Base hourly wages multiplied by billable hours and headcount per tier (Lead Tech, Technician, Apprentice).
Payroll Taxes: FICA (Social Security 6.2% and Medicare 1.45%), FUTA (Federal Unemployment 0.6%), and SUTA (State Unemployment, which varies by state).
Benefits & Insurance: Health, dental, and vision insurance, workers' compensation by tier, and 401(k) matching.
Vehicle Costs: Monthly payments, insurance, maintenance, and fuel for every truck running service calls.
Technology & Software: Housecall Pro, QuickBooks, Google Workspace, and any other field service management tools.
Tools, Uniforms, & Gear: Equipment purchases, branded uniforms, safety gear, training, licensing, and marketing.
Admin & Owner Compensation: Your full salary, plus the fully loaded costs of your dispatchers and office managers. If you aren't including your own compensation, your burden rate is wrong.

TeamBuyIn Tip: For most home service shops with 3 to 10 technicians, the true burden rate lands somewhere between $70 and $150 per billable hour. If your final number is outside this range, it is worth auditing your costs.

How to Calculate Your Burden Rate Step-by-Step

Step 1: How much does your tech cost?

List every tech by tier. Record headcount, hourly wages, hours per day, scheduled days per year, and PTO/sick days. This calculates your total annual billable hours.

Step 2: What are the taxes associated to your tech?

Apply FICA, FUTA, and your specific state’s SUTA rate to your total tech wages.

Step 3: What benefits and insurance does your tech get?

Input health insurance, dental/vision, workers' comp, and 401(k) matches across your team.

Step 4: What are the overhead costs associated to your technician?

Include facility rent, vehicle expenses per truck, software, tools, and uniforms.

Step 5: How much are you paying the admin team and yourself?

Include the fully loaded cost (salary, benefits, taxes) of all non-tech staff and split it across your tech headcount.

Step 6: Add it all together and divide it by the number of total billable hours.

Divide your total annual costs by your total annual billable hours.

Next Steps: Using your Burden Rate

Once you have your burdened hourly rate, you have the foundation to build a highly profitable business:

Flat-Rate Pricing: Multiply your burden rate by the estimated hours for a job, add marked-up materials, and layer your desired profit margin on top.
Commission Plans: Design compensation packages knowing exactly how much margin you have to play with per job.

Want to skip the spreadsheet headache?

TeamBuyIn offers consultations to set up your flat rate pricebook with a built in performance pay structure including figuring out your burden rate. Interested? Schedule a call.