The True Price of Labor in Construction Estimates

The True Price of Labor in Construction Estimates

Accurate estimates can make or break a GC's success. Simply factoring in your employees' hourly wages and projected work hours won't cut it. This leads to underpriced projects and profit leaks. For a healthy bottom line,you need to calculate the fully accounted labor rate of your employees.

A fully accounted labor rate goes far beyond the base hourly pay. It encompasses all the expenses associated with employing your crew, ensuring a realistic project cost:

Direct Labor Costs:

  • Wages: This is the base hourly rate you pay your employees.
  • Overtime: Factor in potential overtime costs if you anticipate exceeding the standard workweek.
  • Payroll Taxes & Benefits: Don't forget employer-paid taxes like Social Security, Medicare, and Workers’ Compensation Insurance, along with benefits like health insurance, retirement plans, and paid time off.

Indirect Labor Costs:

  • Other Employee costs: Vehicle costs, including maintenance and fuel, equipment rentals, cell phones, uniforms, small hand tools, or purchases, and training all contribute to your overall operational costs.

By accounting for all of these, you create a fully burdened labor rate. This comprehensive figure ensures your estimates accurately reflect the true cost of your team.

Your crew is your most valuable asset.

A field laborer's fully burdened rate needs to reflect ALL the cost of their labor. An owner's and PM's fully burdened rate must reflect all the above plus any additional costs associated with their position. All benefits, management responsibilities, and professional development that relates to their ability to perform the function of managing the job need to be accounted for. PMs bring a unique skillset to the table. Their expertise lies in planning, coordinating, and problem-solving, keeping projects on track and within budget, all while meeting quality standards. These talents are needed, and must be billed for.

The Aspire Institute for Contractors has the tools to calculate the fully burdened labor rates for your team. Let the Aspire Institute help you refine your processes and keep more of your money.

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