Burden rate: A burden rate is the amount of overhead a shop adds for each hour of direct labour or machine time, so that indirect costs are recovered through the jobs it prices.
“Burden” is an older accounting word for overhead. A burden rate turns a yearly overhead bill into an hourly figure you can add to each quote.
There are two common uses. The first is a loaded labour rate: an operator’s wage plus employer taxes, benefits and paid leave, then a share of overhead on top. The second is an overhead rate per machine hour, which is close to what many shops fold into their machine hour rate.
Example: an operator is paid €20 an hour. Employer costs add €5, and the shop’s overhead works out at €15 per direct labour hour. The loaded rate is €40 an hour, so a job with 30 minutes of hands-on time carries €20 of labour cost, not €10.
The usual mistake is dividing overhead by every hour on the clock rather than by billable hours. Time spent quoting, cleaning and waiting is not sold, so the rate must be spread over the hours that are.
Do not add a burden rate on labour and a full overhead share in the machine rate as well, or the same costs are charged twice. Read overhead allocation for job shops for how to choose one method.
Go deeper: Overhead allocation for job shops, without fooling yourself