Written for general contractors, remodelers, framers and carpenters, roofers, drywall, masonry and concrete contractors, and kitchen and bath installers in the US, from one-truck outfits to small GCs.
The short version
- Add the full burden to the wage.Employer FICA, federal and state unemployment, workers' comp, general liability charged on payroll, and benefits. Use your own comp class code and state rates.
- Spread it over productive hours only.Multiply by paid hours, then divide by the hours that actually reach a job. The rest still cost you.
- Divide by one minus your target margin.For example, divide by 0.7 for a 30% margin. Adding 30% to cost is markup, which is only a 23.1% margin.
Say you pay a carpenter $32 an hour. By the time payroll taxes, workers' comp, liability and benefits are added, and the paid hours that never reach a job are taken out, each billable hour costs far more. Bid at the wage plus a bit and a job can look fine on paper while losing money.
Margin is not markup
Margin is profit as a share of the price; markup is profit as a share of the cost. For example, a 30% markup is only a 23.1% margin, and a 30% margin needs a 42.9% markup.
- Start with the wage.The hourly rate you pay.
- Add the burden.Employer FICA (7.65%, As of Oct 2026), federal and state unemployment, workers' comp, general liability charged on payroll, and benefits.
- Spread it over productive hours.Multiply by paid hours and divide by productive hours, the hours that actually reach a job.
- Price for margin.Divide the burdened cost by one minus your target margin: for example, by 0.7 for a 30% margin.
- Price the whole job at full cost.The labor rate is not the whole price. A job's full cost also includes materials, equipment, subs and your allocated overhead, so make sure the bid recovers all of them, not just the crew's hours.
| Wage | $32 |
| Employer FICA at 7.65% | $2.45 |
| Unemployment (assumed 1.5%) | $0.48 |
| Workers' comp (assumed 9% of payroll) | $2.88 |
| General liability (assumed 3%) | $0.96 |
| Benefits | $3 |
| Burdened cost per paid hour | $41.77 |
| Bill rate for a 30% gross margin | $67.45 |
$41.768 (before rounding) x 2,080 paid hours / 1,840 productive hours = $47.22 a productive hour; $41.768 x 2,080 / 1,840 / 0.7 = $67.45A 30% markup on the same cost gives only $61.38 an hour. Your comp class code and state rates replace these assumptions.
Burden and unproductive hours are real costs. Markup on the wage alone can leave you below cost before any overhead is recovered.
Estimating the job
- Take off quantities by CSI division.
- Get dated supplier and sub quotes that match your scope.
- Itemize general conditions: supervision, temporary facilities, dumpsters and permits.
- Use an escalation clause or a short validity period on volatile materials.
- State the sales tax treatment on the estimate, and your license number where the state requires it on bids (California, Florida).
Your own bid history by job type is a better guide than any market rate. For a fixed bid running over a year, check the current Bureau of Labor Statistics producer price index for your construction inputs before you sign.
Use your own workers' comp class code and state rates in the burden. Comp rates follow the class code, so getting the right code for each worker is money.
Asked in Greymill
Wage: $32
Employer payroll tax (FICA) at 7.65% (As of Oct 2026): $2.45
Unemployment, assumed 1.5%: $0.48
Workers' comp at 9%: $2.88
Liability at 3%: $0.96
Benefits: $3
Cost per paid hour: $41.77
Per productive hour (one that reaches a job): $41.77 x 2,080 / 1,840 = $47.22
For a 30% margin, divide by 0.7: $41.77 x 2,080 / 1,840 / 0.7 = $67.45
The trap: adding 30% to cost is markup, not margin. A 30% markup is only a 23.1% margin.
And that is labor alone. The bid still has to cover materials, equipment, subs and overhead.
Give me the rest of the crew's wages and I'll run the same check.
Ask it about your own business
Paste this into Greymill with your own figures, and Cash & Profit works it through for your business.
I run a construction or building business in [state], in the US. My crew is [number] people at [hourly wages]. My workers' comp class codes and rates are [details], general liability is charged at [rate] of payroll, benefits cost [amount] an hour, and each person is paid for about [hours] a year but bills about [hours]. Work out the burdened cost per productive hour for each and the rate I need for a [target] gross margin, and compare it with what I charge now: [rates].
More for construction and building in the US
- Profitable on paper, but payroll is due before the pay app clearsPayroll goes out weekly while pay apps take 30 to 60 days and retainage waits for completion. A weekly forecast and an honest WIP schedule keep the gap in view.Read the lesson
- Not knowing who owes sales tax on the materials and labor in my contractsWhether you pay tax on materials or collect it from the customer depends on the state, the type of work and how the contract is written.Read the lesson
- Starting a job without the license, permits and notices my state requiresLicensing is set by the state and the city, home improvement contracts carry their own notices, and OSHA's construction rules apply on every site.Read the lesson
- Signing a GC's subcontract without knowing which clauses my state will enforcePay-if-paid, lien waivers, indemnity, retainage and venue clauses work differently in each state. Know which to strike before you sign.Read the lesson
- Paying my crew as 1099 subs when they work like employeesIn California an unlicensed sub doing licensed work is presumed to be an employee, and at the comp audit an uninsured sub's pay is usually added to your own payroll and charged premium.Read the lesson
- Getting prequalified with GCs and public owners instead of chasing platform leadsHomeowners check reviews and your license, GCs check your financials, bonding and safety record, and public owners check registration and bonds.Read the lesson
- The GC is late paying and I am not sure I still have lien rightsLien rights can be lost in the first weeks of a job with a missed preliminary notice, so check your notices and deadlines before you chase the money.Read the lesson
Open the interactive lesson · Every construction and building lesson · What Greymill knows about the trade
Sources
The primary sources behind this lesson, checked Oct 2026.
- Topic 751 (Pricing, estimating and WIP: the math)
- Monthly release (Market sources, rates and lending conditions)
- PPI (Market sources, rates and lending conditions)
- Product pages (Market sources, rates and lending conditions)
- FOMC statement (Market sources, rates and lending conditions)
- NY Fed SOFR (Market sources, rates and lending conditions)
- H.15 bank prime loan (Market sources, rates and lending conditions)
- Bus. and Prof. Code sec. 7030.5; Fla. Stat. sec. 489.119(5)(b) (Deliverables in house style)
- sec. 7159; GBL sec. 771; Fla. Stat. sec. 489.1425; Tex. Prop. Code sec. 53.255 (Deliverables in house style)
- G702-1992 and G703-1992 (Deliverables in house style)
- Civ. Code secs. 8132 to 8138; Tex. Prop. Code secs. 53.281 to 53.287; Fla. Stat. sec. 713.20 (Deliverables in house style)
- Form WH-347 (Deliverables in house style)
- 29 U.S.C. secs. 206, 207 (People: wages, prevailing wage, comp and I-9)
- Lab. Code sec. 510 (People: wages, prevailing wage, comp and I-9)
- 40 U.S.C. sec. 3142; 29 C.F.R. sec. 5.5(a)(3) (People: wages, prevailing wage, comp and I-9)
- sec. 1725.5 (People: wages, prevailing wage, comp and I-9)
- Gov't Code ch. 2258; N.Y. Lab. Law sec. 220 (People: wages, prevailing wage, comp and I-9)
- Bus. and Prof. Code sec.7125; CSLB Bulletin 22-12 (Oct.11,2022), four additional classifications from Jan.1,2023 and pre-existing C-39 duty (People: wages, prevailing wage, comp and I-9)