Enter the* *indirect costs (overhead) and the direct cost of payroll into the calculator to determine the burden rate.

## Burden Rate Formula

The following formula is used to calculate a burden rate.

BR = IC / DLC

- Where BR is the burden rate
- IC is the total indirect costs associated with hiring and maintaining employees
- DLC is the total direct labor costs of all employees

## Burden Rate Definition

**What is a burden rate? **A burden rate is a ratio of indirect costs associated with hiring and maintaining employees to the direct costs of wages of those employees. The indirect costs include training, benefits, sick leave, pensions, etc.

## Example Problem

How to calculate burden rate?

**First, determine the total indirect costs.**For this problem, the company has 20 total employees, and the average indirect cost per employee is $10,000.00 per year, so, the total would be 10,000 * 20 = $200,000.00.

**Next, determine the total direct wage costs.**The average salary per employee is $50,000 so the total direct wage costs is $1,000,000.00.

**Finally, calculate the burden rate.**Using the formula above, the burden rate is found to be 200,000/1,000,000 = .20.

## About Burden Rate

**What is a good burden rate? **A good burden rate is considered anything under 20 cents per dollar of direct labor, also displayed as .20 or 20%.

**What is a typical burden rate? **The average burden rate in the US is .25 or 25 cents per dollar.