MHIC NASCLA Contractors Practice Exam

What does labor burden refer to in construction cost estimation?

1. Direct salary expenses

2. Indirect administrative costs

3. Raw material costs

4. Profit margins

The correct answer is: Indirect administrative costs

Labor burden refers to the additional costs associated with employing workers, beyond their direct salaries or wages. This includes indirect costs such as payroll taxes, benefits, insurance, and any other expenses that a contractor incurs as a result of employing laborers. Therefore, it encompasses the various expenses that contribute to the total cost of labor, making it crucial for accurate cost estimation on construction projects. In the context of the options provided, the option representing indirect administrative costs aligns well with the concept of labor burden because it emphasizes the non-salary costs tied to labor. While direct salary expenses reflect only the wages paid to workers and raw material costs pertain to the physical supplies needed for a project, these factors do not capture the entirety of what is included in labor burden. Profit margins also represent the expected gains from a project rather than the costs incurred to keep labor available and operational. Understanding labor burden is essential for contractors to arrive at comprehensive and precise construction cost estimates.