Run it with less chaos · Every business
The Hidden Costs That Turn a Profitable Job Into a Loss
For every dollar of wages, small employers spend another 35 cents on payroll taxes, insurance, leave and benefits, and that is only the first of several costs a quick job estimate tends to leave out.
At a glance
- In the Bureau of Labor Statistics' June 2026 data, private employers with fewer than 50 workers paid $27.88 an hour in wages and another $9.76 in benefits and legally required costs, which works out to 35 cents on top of every wage dollar.
- Drive time, mileage at 76 cents a mile, card fees and the hours that never make it onto an invoice add more, and on an illustrative $300 service call they turn an apparent $150 profit into a $77.25 loss.
- Adding these costs to your quote math once, and then checking one week of real jobs against it, shows which prices need to change.
The number and where it comes from
The 35-cent figure comes from the Bureau of Labor Statistics' Employer Costs for Employee Compensation survey, which measures what employers pay per hour worked, including wages, paid leave, insurance, retirement contributions and the costs the law requires, such as Social Security and Medicare, unemployment insurance and workers' compensation. For establishments with 1 to 49 workers in June 2026, total compensation came to $37.64 an hour, of which wages were $27.88, or 74.1%.
| Part of compensation | Cost per hour worked | Share of total |
|---|---|---|
| Wages and salaries | $27.88 | 74.1% |
| Legally required benefits (Social Security, Medicare, unemployment, workers' comp) | $2.97 | 7.9% |
| Paid leave | $2.34 | 6.2% |
| Insurance, retirement and other benefits | $4.45 | 11.8% |
| Total | $37.64 | 100% |
A quote built on the wage alone prices labor at about three quarters of what it costs, and the gap widens once the time that isn't billed is counted. The owner's arithmetic often runs two hours at $30 is $60 of labor, while the business pays for the drive to the job, the drive back, the call to confirm, the parts run and the invoice, none of which the customer sees.
The other costs that ride along on every job
Three more costs are easy to look up and easy to forget. Vehicles cost money per mile, and the IRS standard mileage rate for business driving, 76 cents a mile from July 1, 2026, is a reasonable stand-in for fuel, wear, insurance and depreciation together. Card payments cost a percentage plus a fixed fee per transaction; one widely used processor's published in-person rate was 2.6% plus 15 cents as of October 2026, with a higher rate for keyed-in cards. Overhead, meaning rent, software, phones, the office and the owner's own time, has to be recovered from each working hour, and research on costing suggests dividing it by about 80% of scheduled hours rather than all of them, because people cannot be productive every minute they are on the clock.
A worked calculation
| Price charged (Assumption) | $300 |
|---|---|
| Parts (Assumption) | $90 |
| Technician wage (Assumption) | $30/hour |
| Hours the owner priced (on site) (Assumption) | 2 |
| Hours the job actually used (with drive, parts run, paperwork) (Assumption) | 3 |
| Apparent profit (Calculated ($300 − $90 − 2 × $30)) | $150 |
| Wages for 3 hours (Calculated) | $90 |
| Benefits and payroll costs at 35% of wages (Calculated (BLS ratio, $9.76 ÷ $27.88)) | $31.50 |
| Mileage, 30 miles × $0.76 (Calculated (IRS 2026 rate)) | $22.80 |
| Card fee, 2.6% + $0.15 (Calculated (published processor rate)) | $7.95 |
| Overhead, 3 hours × $45 (Assumption ($45 per practical hour)) | $135 |
| True profit (Calculated ($300 − $377.25)) | −$77.25 |
Illustrative example; replace every assumption with your own numbers.
The largest swing in the example is overhead, which the owner's quick math left out entirely, followed by the extra hour the job used, and both are costs of time rather than parts.
Widget note for the site: a lean calculator with three sliders (hours the job really uses, miles driven, technician wage) and one result, true profit on a $300 job, using the 35% benefit ratio, the IRS mileage rate, a 2.6% plus 15-cent card fee and $45 an hour of overhead as fixed inputs.
How you compare
- Benefits ratio: across all private employers, benefits were 30.0% of compensation in June 2026 against 25.9% at establishments under 50 workers; if you offer health insurance or retirement contributions, your ratio is likely higher than the small-business average.
- Time used versus time billed: time ten ordinary jobs from booking to payment and compare the total with the hours on the invoice; any gap of an hour or more on a short job usually decides its profit.
- Your own baseline: calculate your overhead per practical hour from last month's costs, then use it in every quote for the next month.
The next step is to rebuild the quote for your most common job with all five costs in it and compare the result with what you charge today.
About this research: Figures come from the Bureau of Labor Statistics' Employer Costs for Employee Compensation (June 2026), IRS Announcement 2026-11 and one card processor's published U.S. pricing page as of October 2026. The 80% practical capacity benchmark comes from research on time-driven activity-based costing published in Harvard Business Review. The worked example is illustrative. General information, not legal/tax/financial advice; talk to a licensed professional about your situation.
Sources
- U.S. Bureau of Labor Statistics. Employer Costs for Employee Compensation, June 2026 and Table 6, by establishment size. Released September 9, 2026.
- Internal Revenue Service. Announcement 2026-11, Internal Revenue Bulletin 2026-29. 2026.
- Square. Pricing. Free plan rates, accessed October 2026.
- Kaplan, R. S. and Anderson, S. R. Time-Driven Activity-Based Costing. Harvard Business Review, November 2004; excerpted as Rethinking Activity-Based Costing, Harvard Business School Working Knowledge, 2005.
Related reading: How to Find Out Which Jobs Actually Make You Money · How to Calculate Profit Per Service in Five Minutes · Job Costing for Contractors Who Hate Spreadsheets · How to Raise Prices Without Losing Customers, Based on the Research
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