What is a payroll burden?


Quick Answer

A payroll burden, or a labor burden, is the indirect costs of a labor force. It includes costs that the company pays aside from paychecks.

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Full Answer

A labor burden, sometimes referred to as a payroll burden, is any indirect cost related to having a labor force and employees. This is not typically called a payroll burden, since payroll refers to what employees are directly paid by the company. There are certain things attributed to each employee, such as the amount of taxes a company has to pay on each employee and the potential of paid sick days, where the company loses money and labor for that day.

Any insurance and bonding the company has to have on each employee can be included in the labor burden. Some jobs require their employees to have certain licenses or certificates, and if the company has to pay for these, this is considered part of the labor burden for each employee. Since a company has to match the taxes employees pay to the federal government, the amount of taxes the company pays on each employee is considered part of the labor burden.

Health insurance costs that the company pays for employees, or any type of insurance the company carries on employees, can be considered a labor burden as well. The problem with the labor burden is that even though an employee may only take home $1,000 a month from the company in payroll, this employee may cost the company up to 50 percent of that in addition to the payroll. So the company could be paying $1,500 on the employee with labor burden and indirect costs added to the payroll the employee takes home.

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