How to calculate burden rate on salaries
The burden rate is a commonly used term used by human resources and finance professionals.
It refers to the employees "burden" on the company and includes all costs related to an employee which are over and above the cost of salaries, employer taxes, benefits, and social security. Failure to manage employee burden rate can result in high operating costs which can negatively impact net Income.
Determine employee salary. This is the amount that is paid directly to the employee. Let's say the salary is £32,500 a year per employee.
Determine the amount paid, per employee, over and above regular salaries or compensation. Common examples are paid time off, health insurance, worker's compensation insurance, uniforms or special work clothes, workspace, training and usage of equipment or vehicles. Let's say the total amount is £19,500.
Calculate the burden rate on salaries. Divide the burden costs by total wages. The answer is £19,500 / £32,500 = .6 or 60 per cent.
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