# How to work out your loaded labor rate (what an hour of work really costs you)

Percy Swint, updated 2026-11-04. The numbers are from a small chocolate maker's own costing spreadsheet (February 2024).
Source: https://www.prophitable.io/guides/loaded-labor-rate

A loaded labor rate is what an hour of work costs you, not what you pay per hour: wages plus payroll taxes, insurance and benefits, divided by the hours you pay for. A small chocolate maker's came to $6,503 a month ÷ 160 hours = $40.64.

## Her rate, from her own sheet

The chocolate maker in [the cost per unit guide](/guides/cost-per-unit) worked out her labor rate on one tab of her costing spreadsheet. Her labor cost $6,503 a month. Her kitchen ran 20 days a month, 8 hours a day, so that's 160 hours.

| From her sheet | Amount |
|---|---:|
| Labor cost a month | $6,503 |
| Hours paid a month (20 days × 8 hours) | 160 |
| **Labor rate** | **$40.64 an hour** |

Every recipe and every packed case on her sheet is costed at that rate.

## What goes into the cost

The top of the division is everything an hour of someone's time costs you, not just what lands in their paycheck:

- **The wage.** For a salary, divide the year's pay by 52 weeks and by the hours they work in a week.
- **Payroll taxes** you pay as the employer.
- **Workers' compensation** and **unemployment insurance**, usually a percentage of wages.
- **Benefits and other monthly costs** for that person, such as health insurance, spread over the hours they work in a month.

Prophitable works this out per person, rather than from one monthly total like her sheet. On each staff member you enter the wage and the employer costs, and it shows their **Total Paid Per Hour**. Recipes, packaging and products are costed at the average across your paid staff. A make order is costed at the rate of the person it was assigned to.

## The hours you divide by

The bottom of the division is the hours you pay for, which is more than the hours anyone spent mixing or the hours the oven was on.

That has a consequence for how you time your batches. Setup, cooling, shaping, packing and cleanup are all paid hours, and they're part of making the product, so they belong in each batch's time. If a recipe is timed from the first scoop to the last tray, those other hours are paid for and never land on a product.

Paid time that genuinely made nothing, a slow afternoon or a batch you threw out, is different. It's a real cost, but it isn't the cost of a jar or a case, so it shouldn't be spread into each one. Prophitable's weekly production log works this way. It divides the week's payroll by the hours you paid for, charges each product the time it takes, and shows what's left over on its own line instead of hiding it inside the products.

## What the rate moves

Her case of 24 chocolates takes about 9 minutes of labor. So every $1 an hour her rate is off moves the case's cost by about 15¢. On one case that's small. It lands on every case, though, and on everything else she costs at the same rate.

## Where labor rates go wrong

The first is your own time. If you make the product yourself and don't pay yourself yet, your hours still cost something. Enter what you'd pay someone else to do the work, or your hours go uncosted and every product looks more profitable than it is.

A rate also goes stale. A raise, a new hire or a change in your insurance moves it, and everything costed on last year's payroll is off by the same amount per hour.

Using the wage instead of the cost, and timing only the mixing, are the other two. [The cost per unit guide](/guides/cost-per-unit) covers both.

To set this up in Prophitable, see How to add the wage of everyone who makes, packs or delivers: https://www.prophitable.io/help/cost/staff-profile