BURDEN RATE (DEFINED): FINANCE WORD OF THE DAY from diyCFO | Learn Key Finance Terms!

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The BURDEN RATE has nothing to do with how much weight you can lift.

The BURDEN RATE is all of the "NON WAGE COSTS OF EMPLOYEES".

What's a non-wage cost? Tax. Benefits. Allowances. Parking Spaces. Paid Time Off. Family Leave. Vacation Time. Sick Time.... and more!

In most cases, Burden Rate is expressed as a %. That makes it easy. And in fact, most burden costs are also percentages -- like taxes. The Employer paid taxes (SUTA, FUTA, FICA) are percentages.

Of course, not all costs are percentages. The cost of a parking space is the same for a $10 per hour employee as for a $100,000 employee.

So take all those costs and measure them AS A PERCENTAGE of total gross wages.... then you'll have a nice tidy Burden Rate that you can apply broadly across the total wages base -- or on any single individual.

In other words, if your total wages are $100,000 per year, and all the other stuff costs $17,000, then your burden rate is 17%. And that means that each dollar you spend on wages actually costs you $1.17. It's true of the first dollar, the middle dollar, and the last dollar.

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Best
David