What is the True Cost of Labour?
- mybookkeeperdonna3
- Jul 15
- 2 min read
What should I mark up my employee’s labour to a client?
If you're paying your employee $30.00 per hour, what is your actual cost?Let’s break it down — you'll see how a $30/hour employee really costs $38.42+ per hour.
Real-World Example: ABC Construction
ABC Construction occasionally bills out its employees’ hours directly to clients. Sometimes, as a gesture of appreciation, the company even offers a few weeks of free or discounted labour once a custom home is completed.
This “thank you” perk allows homeowners to request help with tasks like:
Hanging pictures
Building shelves
Gardening
Minor repairs or maintenance
The labour is billed at cost — meaning, no profit margin is added.
Breaking Down the Costs
Let’s examine the cost of one employee working 40 hours/week at a $30/hour wage:
Base Pay
$30.00 × 40 hours = $1,200
Mandatory Employer Contributions
Employer CPP: $61.73
Employer EI: $26.54
Vacation Pay (4%): $48.00
Subtotal Payroll Cost: $1,336.27Hourly Payroll Cost: $1,336.27 ÷ 40 = $33.41/hour
Additional Industry Expenses (may vary)
WSIB (10%): $3.34
Union Dues (5%): $1.67
True Hourly Cost: $33.41 + $3.34 + $1.67 = $38.42/hour
Note: This does not include any extra benefits like health, dental, vehicle allowance, or bonus incentives.
Don't Forget the Admin Overhead
In addition to direct costs, you must also factor in:
Time and cost to administer payroll and HR
Tools, equipment, or materials used
Liability insurance
Downtime and training costs
Final Consideration
You should also ask yourself:
What would it cost the client to hire someone of this skill level independently? Would they even be able to find someone with the same reliability or experience?
Conclusion
Even if your employee earns $30/hour, your true cost can easily climb past $38/hour — and that's before you add any margin or consider the cost of business overhead. Always know your numbers before billing a client.
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