Burden Rate

DEFINITION of 'Burden Rate'

Indirect costs associated with employees, over and above gross compensation or payroll costs. Typical costs associated with the burden rate include payroll taxes, worker's compensation and health insurance, paid time off, training and travel expenses, vacation and sick leave, pension contributions and other benefits. The burden rate provides a truer picture of total labor costs than payroll costs alone.

BREAKING DOWN 'Burden Rate'

Many of the costs associated with the burden rate are hidden costs that are not readily apparent. Since total labor costs, including the burden rate, may be as much as 50% higher than payroll costs alone, it is necessary to calculate the burden rate accurately to get a better picture of profitability.

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