Labor burden in construction is a value added on to the respective hourly labor base wage to to determine the total cost per hour for a particular trade or employee. Labor burden rates are used extensively with estimating and recording actual results. The key to labor burden is that the rate is NOT universal. The value is different per company and in some cases per trade/employee. The rate is highly dependent on the various employee benefits provided and the structure of the organization.
One of the forms of indirect compensation, employee benefits include access to a retirement plans, forms of insurance (health, cancer, vision, dental, and life); vacation and personal time off. Some larger employers provide other forms of benefits especially for individuals involved in management. Most benefits are 100% covered by the employer or the employer agrees to subsidize the cost. For a more in-depth understanding, read: Employee Benefits.
After three decades of discussion, in-fighting and wrangling, Congress passed a health insurance mandate along party lines of vote. This health insurance mandate changed the rules for employers and affects the accounting department and in particular, the proper bookkeeping for the respective amounts paid by both the employer and employee.
Employee benefits consist of vacation, sick time, retirement benefits, healthcare and other de minimus benefits. As a function of accrual accounting these benefits are estimated and posted as a deferred liability in the accrued payroll section of the current liabilities section of the balance sheet. This lesson explains how to calculate the respective benefits and post this information to the books.
One of the best parts of being a bookkeeper is seeing employees smile when they utilize employee benefits. There are a multitude of different employee benefits out there including: 1) Health Insurance, 2) Retirement, 3) Life Insurance, 4) Dental Care, 5) Vision Care, 6) Cancer Insurance, 7) Disability Insurance and 8) Child Care.
Payroll is envisioned as the simple employer employee agreement related to compensation for services. I often think of this as the simple handshake whereby the employer agrees to pay the employee a set rate per hour of work. This was true a hundred or more years ago, but over time; history and governmental regulations complicated this simple relationship.