You Pay Them $28. They Cost You $41.

Fully loaded labor cost is the number your entire rate card stands on. Most owners have never run it. Yours takes one page and about twenty minutes.

If you read the first issue in our three part launch series, you know how a couple of simple questions can reveal a lot about an owner’s planning.

Ask an owner what his best tech costs and you’ll get a payroll answer: “$28 an hour.”

Now ask what that same tech costs for every hour that actually lands on an invoice.

Long pause; no answer.

Here’s the thing: the payroll answer is off by $13. The invoice answer is off by $33. Both leaks are hiding in plain sight, in bills you already pay every month. In this issue, we’ll help you find them.

Here’s the burden stack for one $28 an hour tech, using realistic and honestly conservative numbers. Swap in your own.

The burden stack

How we got these numbers: payroll taxes are the federal 7.65% FICA plus roughly 1.7% for state and federal unemployment. Workers comp is priced at 5% of wage, the middle of the typical $3 to $8 per $100 of payroll range for service trades (your state and class code set the real rate). Health is a $607 monthly employer share, in line with national employer averages. The truck line covers the payment, fuel, insurance, and maintenance at about $800 a month. These are conservative national ballpark figures, not a quote for any one state. Swap in your own bills and you have your technician’s true cost per hour.

Every line on that table is money that leaves your account because that tech is on your payroll. None of it is optional, and none of it shows up when your plan simply states “a tech makes $28 an hour.” The wage is just the down payment. The real number is 46% higher.

And this number touches everything!

• Your hourly rate stands on it.
• Every estimate you send starts from it.
• What a raise really costs the business.
• Whether you can afford the next hire.
• What happens to production when you promote your best guy.

All of it runs through your fully loaded labor cost. In Issue #1 we built the pricing formula, Price = Cost ÷ (1 − Target Margin). That formula has one weakness. It believes whatever cost you feed it. Feed it $28 and it will confidently price you into a hole, and your business into a cash crunch not long after.

The hours you can’t bill

Here’s where it gets worse, and where almost every company stops doing the math.

You pay that tech for 2,080 hours a year. 40 hours a week, 52 weeks a year. But holidays, vacation, training, the morning huddle, drive time between calls, the parts run, the callback you didn’t charge for: none of those hours land on an invoice. Industry benchmarks put technician efficiency at 60 to 70% of paid hours. So let’s say you have an above average tech who bills 67% of his paid hours. That’s about 1,400 billable hours on the year.

So the real question was never what he costs per hour you pay him. It’s what he costs per hour you can bill.

$85,280 ÷ 2,080 paid hours = $41.00

$85,280 ÷ 1,400 billable hours = about $61

Same tech. Same year. Same money out the door. The only thing that changed is the denominator, and if Issue #1 taught us anything, it’s that the denominator is where businesses quietly win or lose.

So the plan is simple: 1) find your real fully loaded labor cost per hour, then 2) price by the hours you can sell, not the total hours on your payroll software.

What the gap will cost you

Let’s say an owner is having a great year. The phones won’t stop, he’s up to five techs, and the trucks are rolling six days a week. His rate card came from the rule of thumb half the industry uses: double the wage and you’re covered. His techs average $28 per hour, so labor goes into every quote at $56 an hour. Feels safe. It’s double.

But we just did the honest math. His cost per billable hour is about $61. That $56 rate is roughly $5 underwater on every hour his crew sells, before one dollar of rent, office staff, insurance on the building, marketing, or his own pay gets touched. Five techs averaging 1,400 billable hours is 7,000 hours a year. That’s a $35,000 leak, before we even factor in the fixed expenses of running the business.

So the year gets busier and the bank account gets thinner. He’s missing his kid’s games to run calls that are losing him money. Every new truck he adds makes the number worse, not better, and nothing in his reports will say why, because payroll clears every Friday and the jobs all feel profitable. He didn’t have a demand problem. He had a denominator problem, and growth was multiplying it.

The fix is not heroic. It’s one page of math, done correctly once, checked once a month, and wired into every quote that leaves the building.

If the second number scares you, good. Don’t panic and don’t reprice everything tonight. Plug the real cost into your next estimate and see what it tells you. A gauge that reads wrong is worse than no gauge at all.

Common Questions

What is fully loaded labor cost?

The wage plus every cost of employing the tech: payroll taxes, workers comp, health insurance, vehicle, phone, tools, and training, expressed per hour. For service trades it typically runs 35 to 50% above the base wage.

How do I calculate labor burden for a technician?

Add the annual wage and all employment costs, then divide by 2,080 paid hours for cost per paid hour. Divide the same total by actual billable hours for the truer number.

What is a good billable efficiency for a service tech?

Industry benchmarks for HVAC, plumbing, and electrical service techs run 60 to 70% of paid hours, which is roughly 1,400 billable hours out of 2,080.

How much should I charge per hour to cover a tech?

Start from cost per billable hour, then add overhead recovery and your target gross margin using Price = Total Job Cost ÷ (1 − Target Margin). Your total job cost is the fully loaded labor for the hours on the job plus supplies and materials. The full rate build, overhead included, is its own future issue.

If you read this and realized your rate card was built on the payroll number, that’s exactly the kind of thing our assessment digs into. No pitch. Just your numbers, and what they’re telling you.

Next issue: your P&L shows one margin for the whole company, and that number is lying to you. A blended 8% can hide a 22% service business quietly carrying an install department that loses money on every job. That one’s called Install vs. Service: One Number Can’t Be Trusted. Two weeks.

Jason Rousseau, Foundational CFO Group