can anyone explain burden rate?

[chocolatelab]

Strange question but looking for clarity. A segment of the company I work for does service and vehicle repair. The shop has a published hourly shop rate and an internal burden rate. The strange thing is that no one seems to be able to tell me exactly why the burden rate is " x " and how that number can be managed. Is it just accounting semantics.

Any insight would be greatly appreciated.

[Paul_Heery]

Here is a good summary What is Labor Burden? | 98-FAQ

A burden rate of 50% is not unusual in business. Managing burden is all about controlling costs and productivity.

[Porsche-O-Phile]

Taxes, pension, annuities, insurance.

This makes a HUGE difference in the construction industry (base rate or prevailing wage rate versus "fully loaded" rate with burden factored in). An electrician who takes home $30 an hour can be billed out at more than twice that because of all the "other stuff" it costs his/her employer to keep them on the books. I see this routinely.

[looneybin]

i usually charge burden rate if the client is a huge PITA

[JeremyD]

Statutory burden rates usually refer to the other costs relating to hiring someone

Percentages of Pay..............Burden
FICA/Medicare........................7.65%
SUTA Taxes............................0.50%
FUTA Taxes............................1.32%
Worker's Comp......................0.45% (For an office worker)
General Liability.....................0.22%
Other Cost of Sales...............0.00% (Drug screens, background checks,

Burden Rate..........................10.14%

========================
Percentages of Pay..............Burden
FICA/Medicare........................7.65%
SUTA Taxes............................0.50%
FUTA Taxes............................1.32%
Worker's Comp......................5.79% (For an Auto Repair Business)
General Liability.....................0.22%
Other Cost of Sales...............0.00%

Burden Rate..........................15.48%

========================

This is just the "cost" associated with hiring someone. "Burdens" charged also typically include shop and machinery costs above and beyond the labor aspects.

construction / roofing workers' comp charges can exceed 30-100% of the labor charges - so a $10.00 and hour worker can accumulate $10.00 an hour in WC costs + another 10% for taxes... Worker's Comp rates are state specific.

[chocolatelab]

thanks guys, sooooo

if our shop has a published rate of 108 per hour and our internal burden is 100 an hour then we are somewhat a train wreck

[VaSteve]

I didn't click the link, but from the context of the question it sounded like the "internal" rate charged by the auto shop to whatever division chocolate lab is in. Maybe I'm confusing with "transfer rate" or something but the rate is derived from cost recovery + some level of profit (less than open market) since the auto repair division is measured on their profit too. Partly its a deterrent to keep from taking on too much internal work at the expense of outside customers.

The other measures I always think of a "fully burdened" (health care, fica, overhead, etc).

Can you restate the question?