PAID TIME OFF AND HOLIDAYS: WHAT THEY ADD TO EVERY PRODUCTIVE HOUR.
A paid holiday, a vacation day and a sick day all cost the same as a working day: the wage, the payroll tax and usually the workers comp are all owed, and no job gets the hours. So the cost of the whole paid year is divided by fewer productive hours. Start with 2,080 paid hours, take out holiday, PTO and sick hours, and divide 2,080 by what is left. In the example below, 25 paid days off leave 1,880 productive hours, and the cost of a productive hour is 10.6 percent higher than the wage. Unused PTO is also a liability on the balance sheet, and whether it is paid out when someone leaves depends on state law and the written policy.
Most owners know what a holiday costs in lost production and never see it as a rate. This page shows how to turn leave into a percent, when the balance sheet records it, what changes by state, and how it works on prevailing wage jobs.
WHAT IT MEANS.
Paid leave burden is the cost of the hours an employer pays for holidays, paid time off and sick time, which produce no billable work, spread over the hours the employee does work on jobs.
Federal law does not require a private employer to give holidays, vacation or sick time. Those are set by the company's policy, by an agreement with the employee or by a union contract, and some states and cities do require paid sick leave. This page is about cost and cash, not legal or tax advice. Plan rules, tax rules and state law differ, so the owner checks the policy with the state labor department or an employment attorney, and the accounting treatment with a tax professional.
WHERE THE COST ENTERS THE RATE.
A paid hour with no production is still a paid hour
When the crew is off on a paid holiday, the wage is owed, the employer payroll tax is owed and in most cases the workers comp premium follows the payroll. No job receives the hours, so no revenue comes in for them. That cost has to be recovered from the hours the crew does work, which means it belongs in the rate and not in a guess. A policy of ten holidays and two weeks of PTO is a pricing decision, whether or not anyone priced it.
How to find productive hours
Start with 2,080 paid hours, which is 40 hours for 52 weeks. Subtract the holiday hours, the PTO hours and the sick hours the employee is paid for. What is left is the number of hours that can go on a job. Divide the cost of the whole paid year by that number, and the cost of one productive hour comes out higher than the wage. The labor burden page covers how the rate is built from taxes, insurance and benefits, and this page covers only how much leave changes the hours under it.
Paid leave does not count toward overtime
The Department of Labor says the federal wage law does not require pay for time not worked, and that paid time off an employer chooses to give does not count as hours worked and does not have to be counted toward overtime. A crew member with a paid holiday in a week still reaches overtime only after 40 hours worked. State overtime rules can differ, so the payroll provider confirms the state rule.
Leave is paid in the weeks that bring in the least cash
Holidays cluster at the end of the year, when pay applications are often delayed by the same holidays on the owner's side. Vacation clusters in summer and around school breaks. The payroll for those weeks goes out on the normal cycle while the billing for the hours that were not worked never happens. A budget that treats leave as an annual average leaves that month out. Cash planning looks at leave by month, next to the payroll cycle.
Earned PTO is a liability on the balance sheet
Under US accounting rules for compensated absences, an employer records a liability when the obligation comes from work already done, the time vests or accumulates, payment is probable and the amount can be estimated. A policy where unused time disappears at year end and nothing accumulates generally needs no liability. A policy where balances roll forward does. Many small contractors never record it, so each month's profit is overstated by the PTO earned and not yet used, and the cost appears in the month a long-time employee leaves or takes three weeks off. How it is treated on the tax return is a question for a tax professional.
Payout at termination depends on the state and the policy
The Department of Labor says that vacation and severance obligations are generally set by contract and state law, and that some states require final pay immediately. State rules differ a lot. California's labor department says vacation is not required, but once a policy exists the earned time is treated as wages. Missouri's labor department says vacation pay is not required unless a contract provides it. The written policy, including how time accrues, whether it is capped and whether it rolls over, is what an owner and a state agency would read. Owners with crews in more than one state check each one.
Paid sick leave is state and city law, and it keeps changing
There is no general federal paid sick leave requirement for private employers. A number of states, the District of Columbia and a number of cities and counties require it, with different rules for how it accrues, how much can be used, whether it rolls over and which employers are covered. Where a law applies, the cost is owed whether or not the owner offered the benefit. Crews that work in more than one city or state are the reason to list every jurisdiction and check each rule with the state or city labor agency.
Prevailing wage jobs treat leave as a fringe
On a Davis-Bacon job the prevailing wage is the basic hourly rate plus fringe benefits, paid on every hour worked on the site. The Department of Labor's rule lists vacation and holiday pay among the fringe benefits that can count, but not benefits the contractor is required to provide under other federal, state or local law. Its guidance says many vacation and sick leave plans in construction are unfunded, and that unfunded plans need approval from the Department before credit is taken. The credit is the cost expected for the year divided by all hours worked, on both public and private work. State prevailing wage rules differ. See the page on health plan fringe credit for the same method applied to insurance.
WHAT IT LOOKS LIKE IN DOLLARS.
Take a $30 an hour employee paid for 2,080 hours a year. Ten holidays, ten PTO days and five sick days at 8 hours each is 80 + 80 + 40 = 200 hours. Productive hours are 2,080 - 200 = 1,880. The wage for the paid year is 2,080 x $30 = $62,400. Spread over 1,880 hours, that is $33.19 an hour, or $3.19 above the wage. 2,080 divided by 1,880 is 1.106, so leave adds 10.6 percent to the cost of each productive hour. Payroll tax and workers comp apply to the leave wages too, and they are already in the whole-year cost when the burden page's method is used.
The 200 hours cost 200 x $30 = $6,000 per employee in wages. For 20 field employees that is $120,000 a year, before payroll tax. On $6M of revenue it is 2.0 percent of revenue, and it is real cost whether the estimate included it or not. If the same $6,000 is counted as fringe on a prevailing wage job, it is $6,000 divided by 1,880 hours, or about $3.19 an hour of the fringe rate, which only works where DOL's rules for the credit are met.
Suppose 12 employees each have 40 hours of earned PTO not yet used, at an average of $30 an hour. The liability is 12 x 40 x $30 = $14,400. If all of it were paid out, the employer payroll tax at 7.65 percent adds about $1,100. A balance sheet with no PTO accrual is $14,400 lighter than the obligation, and the profit for the months that earned it is $14,400 higher than it should be.
WHAT WE CHANGE.
SPM asks for the holiday calendar, the PTO schedule and the sick leave policy, and turns them into paid hours and productive hours by crew type. The result is a leave percent that goes into the labor burden rate, so every estimate and every job cost report uses it. The rate is rebuilt when the policy changes or a new state or city rule applies.
SPM pulls the earned and unused balances from the payroll provider each month and books the change in the accrued PTO liability. Profit for the month then includes the cost of the leave it earned. Payroll itself stays with the payroll provider, because SPM does not handle payroll. The owner sees the liability next to the other short-term obligations.
SPM lists every state and city where crews work and asks the owner to confirm the final pay, vacation payout and paid sick leave rules with the state labor department or an employment attorney. The expected payout for an employee leaving is estimated from the policy and the balances, so a resignation does not surprise the cash plan.
SPM works out the leave cost per hour across all hours, public and private, and checks with whoever completes certified payroll whether the plan has the required approval. Where credit cannot be taken, the cost goes into the bid as additional cost, and the bid does not leave it out.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing. No payroll. The one-time onboarding fee is right here in the table.
| Last 12 months revenue | Monthly fee | One-time onboarding |
|---|---|---|
| Up to $1M | $1,900 to $2,900 | $1,000 |
| $1M to $3.5M | $2,600 to $3,900 | $1,500 |
| $3.5M to $6.5M | $3,800 to $5,700 | $3,000 |
| $6.5M to $9.5M | $5,100 to $7,100 | $4,500 |
| $9.5M to $12.5M | $6,100 to $8,500 | $6,000 |
| $12.5M to $15.5M | $7,400 to $11,000 | $7,500 |
| $15.5M to $18.5M | $9,400 to $13,500 | $9,000 |
| $18.5M+ | Quoted individually | Quoted individually |
The onboarding fee covers migrating your books back to the start of your last taxable year and getting you fully operational in 60 days. It's billed once, with your first invoice. It's the same for all three tiers. Your first month is prorated, and your monthly engagement starts on the first of the first full month.
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items. The onboarding fee is right here in the table.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions and never in a report.
Your bookkeeper still does the books.
You stop touching the books.
Everything in Core, and we do the bookkeeping and the controllership as well. Your office stops answering coding questions and stops fixing a reconciliation that will not balance on the last day of the month.
We do the books. No payroll.
Every job shows its margin while it is still open.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the books, the job costing, and the software. No payroll.
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