In very simple terms, a burden rate is another term for costs incurred by a company that are perhaps not straight away ‘obvious’.
For example, obvious expenditure for a company would be things like salaries, electricity bills and running costs and telephone or internet bills. A burden rate is the combination of every other cost incurred by the company surrounding the people and employees on pay roll, because it's not just wages and salaries of the employees that cost the company.
There are many things that can make up a total burden rate, such as worker's compensation, this could be money paid out to an employee if a complaint against the company (for example a health and safety issue or unfair dismissal) is filed and approved. Paid time off is also a huge part of an overall burden rate as most companies offer approximately around three weeks of paid holiday or annual leave. This is where an employee takes time off work for a short or long period of time but gets paid full wage for it.
Sick days also make up the burden rate, and although most governments foot the bill for a majority of the hourly pay that your employee receives when they are off sick, a cost is always incurred by the company.
Other charges that are considered to be part of the 'burden rate' are travel expenses racked up by employees, training courses and materials and any pension or health insurance schemes the company offers as a loyalty package.
In order to calculate profit and expenditure accurately, the burden rate must be calculated by a company regularly, and in some cases (such as if it is too high), the rate should be reviewed.
For example, obvious expenditure for a company would be things like salaries, electricity bills and running costs and telephone or internet bills. A burden rate is the combination of every other cost incurred by the company surrounding the people and employees on pay roll, because it's not just wages and salaries of the employees that cost the company.
There are many things that can make up a total burden rate, such as worker's compensation, this could be money paid out to an employee if a complaint against the company (for example a health and safety issue or unfair dismissal) is filed and approved. Paid time off is also a huge part of an overall burden rate as most companies offer approximately around three weeks of paid holiday or annual leave. This is where an employee takes time off work for a short or long period of time but gets paid full wage for it.
Sick days also make up the burden rate, and although most governments foot the bill for a majority of the hourly pay that your employee receives when they are off sick, a cost is always incurred by the company.
Other charges that are considered to be part of the 'burden rate' are travel expenses racked up by employees, training courses and materials and any pension or health insurance schemes the company offers as a loyalty package.
In order to calculate profit and expenditure accurately, the burden rate must be calculated by a company regularly, and in some cases (such as if it is too high), the rate should be reviewed.
