Overview of Labor Burden
Labor burden is the cost that a company incurs in the course of performing a job, in addition to the hourly amount or salary that the employee is paid. This can include health insurance, employer paid taxes, benefits, vacation time, and so on. Businesses that perform jobs usually want to add these labor burden or payroll overhead costs to jobs to more accurately assess the actual cost of their jobs and to bill customers accordingly.
Sage 50 allows you to create a flat percentage that will be added automatically to the costs of a job when you pay your employees. This percentage can be set up at either the company or job level. When you pay your employees and assign their wages to jobs, Sage 50 will automatically calculate the appropriate amounts and update job costs and general ledger accounts specified by you in Job Defaults.
Note: Labor burden cost calculated by Sage 50 can only be approximate. An example is how FICA is applied. Since labor burden is calculated on regular earnings, there is no way for the calculation to tell whether or not an employee has reached their FICA limit. Hence, FICA may not be applied correctly to the job.
Setting up labor burden
You can set up your labor burden on a company wide or specific job basis.
Company wide
- To set up your labor burden percentage, select Maintain, Default Information, Job Defaults.
- Select the Labor Burden tab.
- Enter your labor burden percentage and the appropriate general ledger accounts. Tell me more about this.
- Click OK..
Job Specific
- If you need to vary your labor burden percentage by job, select Maintain, Jobs, Jobs.
- Select the appropriate job record, and enter the correct percentage in the Labor Burden Percent field. Save the record. Continue with other jobs.
Calculating labor burden
- On either the Payroll Entry or Select for Payroll Entry windows, click the Jobs button. This will open the Labor Distribution to Jobs window.
- In the Hours Assigned to Jobs area, select the job/phase/cost code and enter the number of hours (for hourly employees) or the amount and/or hours (for salary employees). Sage 50 will automatically calculate the labor burden based on the percent entered in the Labor Burden Percent field in the job record for the particular job. If you want to change the percentage on this window, you may do so. Sage 50 will automatically recalculate the amount. Tell me more about the Labor Distribution to Job window.
Reimbursable Expenses and Labor Burden
When you bill your customers for work done on jobs, Sage 50 will automatically add the amount of labor burden to the employee cost on the Reimbursable Expenses tab of the Sales Invoicing window. In this way, you can quickly bill your customer for not only the direct wages of the employee but also the labor burden.