A $30 an hour hand costs you $32.43 in Texas. What it costs above that, you chose

You quote off the wage. The hand is $30 an hour, the scope looks like 400 hours, so $12,000 of labor goes into the number and you move on to material. That is how the bid gets built, and it is why a full year ends thinner than the calendar promised.

The wage is the smallest true figure on your cost sheet. Sitting on top of it is a stack of payroll costs, and in Texas that stack is unusually short. Two federal lines that run on the whole wage, one federal line that runs out in February, and one state line the Texas Workforce Commission bills quarterly on the first $9,000 a worker earns. Add them to a $30 wage in 2026 and you land at $32.43 an hour, about eight cents on the payroll dollar.

Then comes the line that makes this a Texas page rather than a generic one. Workers compensation is elective for private employers here under Labor Code s.406.002, and on a construction payroll it is usually the biggest single item in the stack, larger on a high-hazard class than Social Security and Medicare put together. It is a purchase, not a levy. The distance between a $32 burdened hour and a $37 burdened hour on the same $30 wage is a decision somebody made in a broker's office.

After that comes the division that gets skipped. You pay for 2,080 hours a year and you invoice a good deal fewer. Below is the whole arithmetic on one framer, in figures you can copy straight onto your own crew.

The Texas stack is four lines long, and here it is for 2026

One hand at $30.00 an hour, 2,080 paid hours, $62,400 of gross wage for the year.

That is the entire mandatory list. There is no state income tax to withhold, because Article 8, Section 24-a of the Texas Constitution, added by Proposition 4 in 2019, forbids a tax on the net incomes of individuals outright. There is no state disability levy, no state paid leave levy, no statutory vacation accrual on top of the wage. A Texas employer registers with the IRS and with the TWC, and that is the set.

The FUTA line assumes you paid your TWC bill in full and on time, which is what buys the 5.4% credit and takes the federal unemployment rate from 6.0% down to 0.6%. Pay the state late and the credit shrinks, which is a rare case of a filing deadline being worth exactly 5.4 cents on the dollar of the first $7,000.

Your own TWC rate will not stay at 2.7%. That is the entry rate a new account gets, set at the greater of 2.7% or the average for your industry classification. Rated accounts for 2026 run from 0.32% to 6.32%, built out of a general tax rate off your own benefit ratio plus three fixed add-ons the Commission set for 2026: a 0.21% replenishment tax, a 0.01% obligation assessment and a 0.10% employment and training investment assessment. The deficit tax rate is zero this year, which is why the floor sits at exactly 0.32%.

Stop shopping your TWC rate: the whole spread is 26 cents an hour

Here is the Texas fact worth carrying around. The unemployment wage base is $9,000 a head per calendar year and it does not move with inflation. FUTA's is $7,000. Both of those are fixed dollars, not percentages, so they stop mattering almost immediately.

Run the extremes on the same $30 hand:

The best experience rating in the state and the worst are 26 cents an hour apart on this worker. Compare that to a single point of movement on your workers comp rate, which is worth 30 cents an hour on a $30 wage before anything else happens, and you can see where your attention belongs.

The wage bases also front-load the cost. A hand at $30 for a 40 hour week earns $1,200 a week, so he clears the $7,000 FUTA base in week six and the $9,000 TWC base in week eight. From the start of March that hand carries 7.65% of burden and nothing else mandatory. In January he carried 10.95%. Same worker, same wage, 43% more payroll tax, because the state and federal bases had not run out yet. A contractor who prices a January job off a July burden percentage is under by about three points of labor.

And because those two lines are flat dollars, the mandatory burden percentage falls as the wage rises:

Between an $18 laborer and a $65 superintendent the required burden moves half a point. Anyone quoting you a single Texas burden percentage is close enough on this part, and nowhere near close enough on the next part.

The elective line, and how to price it in one move

Workers compensation premium is payroll driven and the formula is short: annual payroll divided by 100, multiplied by the rate for the class of work, multiplied by your experience modifier.

Divide that by 100 and the useful version falls out. A rate quoted per $100 of payroll is a straight percentage of the wage. A $5.50 rate is 5.5% of wage. On a $30 hand every whole dollar of quoted rate costs you exactly 30 cents an hour.

Those rates are the shape of the answer rather than the answer. Write your broker's quoted rate into the first column and the rest of the row follows in one multiplication.

Two things about Texas comp rates are worth knowing before you shop them. Since July 1, 2020, after Senate Bill 1336 removed its duty to develop them, the Texas Department of Insurance has not published relativities as a rate basis, so there is no state number to look up: an insurer prices off its own filed classification relativities or off the NCCI advisory loss costs. TDI accepted the current filing in Commissioner's Bulletin B-0001-26, effective July 1, 2026, at an overall average 3.8% decrease. That means two carriers quoting the same class code on the same crew can come back materially apart, and the gap between the quotes is yours to keep.

The experience modifier is the other lever. It multiplies the whole line. On the $9.00 row, an EMR of 0.80 takes 54 cents an hour off your cost of labor, on the same wage, for the same work, purely on your claims record.

Non-subscriber is a lower line, not a zero line

Texas is the one state where a private employer can decline coverage. Public work is the exception: Labor Code s.406.096 makes a governmental entity require every building or construction contractor on its project to certify coverage for each employee on the job, and every subcontractor to hand the same certificate to the general contractor. City, school district and state jobs price off the subscriber rows above, and carrying the policy is what gets you onto the bid list for them.

The Division of Workers' Compensation counted 24% of Texas employers as non-subscribers in its 2024 biennial report, the lowest share since 2016, covering 13% of Texas employees, the lowest in a decade.

The comp row above shows $0.00 for that column, and left there it is fiction. A non-subscribing contractor with a crew buys two products in comp's place: an occupational injury benefit plan that pays medical and wage replacement to a hurt worker on a schedule the plan document sets, and employers liability cover that defends the negligence suit. They are priced below comp for the same payroll, which is the commercial case for them, and they are not free.

So the honest version of the non-subscriber row is the pair of broker quotes divided by $62,400, and the saving is the gap between two numbers rather than the whole premium. The rest of that decision, the exclusive remedy you give up under Labor Code s.408.001 and the three defenses s.406.033 strips out of your case, is worked through in workers comp is optional in Texas.

One consequence lands directly on your cost of labor. No comp policy means no experience modifier, and the EMR box sits on the prequalification form of the general contractors with the best schedules. That box, and the three lines that fill it credibly when you have no EMR to report, is in getting on GC bid lists in Texas.

Keep overtime in its own column and stop paying premium on the half

Texas has no overtime statute of its own. Overtime here is the federal Fair Labor Standards Act, 29 U.S.C. s.207: one and a half times the regular rate for hours worked over 40 in a workweek, counted weekly, with no daily rule.

Carriers rating off the NCCI Basic Manual do not charge comp premium on the extra pay portion of overtime, defined as the difference between the regular rate and the overtime rate multiplied by the overtime hours. The condition is a record-keeping one: your payroll records have to show overtime pay separately by employee and in summary by classification. Where the total is lumped in at time and a half, a third of it comes out. Where double time is shown separately, half comes out. Where nothing is separated, the auditor rates the whole amount.

Put a number on a column in a spreadsheet. That $30 hand working 8 hours of overtime a week for 48 weeks logs 384 overtime hours at $45, which is $17,280 of overtime pay, of which $5,760 is the excess half. At a $9.00 class rate that excess carries $518.40 of premium a year. Across six hands it is $3,110.40, created or destroyed by whether your payroll register keeps two columns or one.

FICA still applies to the whole overtime check, so this is a comp-line saving rather than a payroll-tax one. It is still the cheapest $3,000 on this page.

Collect the certificate before mobilization and keep $7,200 off the audit

Your comp policy ends the year with an audit. The auditor reads your tax filings, your cash disbursements journal and your 1099s, and asks for a workers compensation certificate for each subcontractor you paid. Where a certificate is missing and the worker does not meet the independent contractor definition in Labor Code s.406.121(2), the definition inside the subchapter written for building and construction workers, those payments go into your payroll and get rated at your class code.

That turns a missing certificate into a premium bill. Eighty thousand dollars paid to a sub with no certificate on file, at a $9.00 class rate, is $7,200 added to your premium after the work is finished and the job is closed. Collecting certificates before mobilization, with the right entity name and the right endorsements, is covered in certificates of insurance for Texas contractors.

Divide by the hours you can invoice, not the hours you pay for

Burden is usually taught as a percentage on the wage, and it is. The part that gets left out is that the whole year's cost has to be recovered across the hours that reach an invoice, not the hours that reach a paycheck.

You pay for 2,080. You invoice fewer, because of drive time between two jobs, loading and unloading, the dump run, the morning the mixer was late, the afternoon waiting on the inspector, punch list, rework, the eighty hours of holiday if you give it, and the week he was out. Those hours cost you the full burdened rate. They cannot be billed to anybody.

Take the subscriber column at a $5.50 comp rate: $70,890.60 for the year, all in.

At a realistic 1,700 billable hours, the $30 hand costs $41.70 for every hour you can put on an invoice. Against the $34.08 you get from dividing by 2,080, that is 22% more, and it is the largest single error in the whole sum. Utilization moves your cost of labor harder than your comp rate does, harder than your TWC rate does, and harder than the wage itself.

Then overhead. The truck and its fuel and insurance, small tools and consumables, the phone, the share of general liability that follows the crew, software. Call it $14,000 a year attached to one field hand and it adds $8.24 to every billable hour.

One billable hour of that $30 framer costs you $49.94. That is 1.66 times the wage, on a market where labor rules of thumb usually stop at "wage plus a third".

Turn the cost into a rate, in margin and not markup

Cost is not price. What the market pays and what the job is worth are still yours. What the floor does is tell you which side of the line a rate sits on.

Margin is the share of the final price you keep. Markup is what you add to cost. A 50% markup on $49.94 gives $74.91 and a 33% margin, so a contractor who marks up by half believing he is keeping half is keeping a third, on every labor line, all year. The markup and margin calculator converts between them in one field, and the wider job of turning cost into a quoted price is pricing construction jobs in Texas.

Hire or sub the work out: the crossover is 1,543 hours

Now the other way to staff the work. Pay a sub on a 1099 and none of the stack applies: no employer FICA, no FUTA, no TWC line, no comp premium on him once his certificate is on file. You also stop paying for hours he does not invoice, which is the second division disappearing from your side of the ledger.

So the comparison is not rate against wage. It is total annual cost against invoiced hours. Your $30 employee costs $84,890.60 for the year, payroll and his share of overhead together. Divide that by the sub's hourly rate and you get the number of hours where the two cost exactly the same.

Read the $55 row. Below about 1,543 billable hours a year the sub is cheaper, above it the employee is. That is a workload question with a number attached, and it changes with your book rather than with your opinion. A contractor whose crew is genuinely busy 85% of the year is right to hire. A contractor riding out a slow spring on 1,200 billable hours is paying a premium for the privilege of keeping someone on the books.

Two things keep that table honest. A sub's rate has to carry his own self-employment tax at 15.3%, being 12.4% for Social Security up to $184,500 plus 2.9% for Medicare with no ceiling, plus his own occupational cover, truck and tools. A man quoting you $32 an hour for the same work as your $30 employee has either priced himself below your employee's take-home or is not really a sub. And the classification has to hold: get it wrong and the same worker comes back as your employee with back payroll tax attached, and, on the day he is hurt, as an employee of a non-subscribing employer. The paperwork and the tests that keep a Texas 1099 crew standing up are in running a 1099 crew in Texas.

One filing note for 2026: the reporting threshold for Form 1099-NEC rose from $600 to $2,000 for payments made this year, indexed for inflation from 2027. The form is smaller. The classification question is exactly the same size it was.

Put your own numbers in before the next quote goes out

Every figure on this page is arithmetic you can redo in ten minutes with three inputs: the wage, your broker's comp rate per $100, and an honest count of billable hours. The federal rates and the TWC bases are 2026 figures, so check the year before you reuse them, and the shape of the sum survives whatever the new numbers are.

The contractor hourly rate calculator runs the second division and the margin step for you, and prints what a slow quarter does to the rate at six different utilization levels. Put your real year in it, then compare the answer to the rate on the quote you were about to send.

On AEC Stack that rate lands on the quote, the quote becomes the invoice, and the invoice starts the Texas payment clock the same day, which is invoicing and getting paid in Texas. There is no monthly subscription. The platform fee is 2.5% of each invoice processed through the platform, taken on the payment due date.

Then point the rate at work worth winning. Pull the commercial jobs going out in your county on find work, price one at your real cost of labor, and see whether the number you have been sending was ever going to pay for the crew that builds it.