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Note: The English spelling for Labour/ labor has been used in this article.
It is extremely easy to ask another contractor what their charge out rate is, or you may rely on your trade association to calculate it for you. However, it is much more rewarding to calculate the cost of labour yourself as it provides your firm with more control.
It is important to establish the cost of labour before adding the overheads and profits.
The following is a successful method in Australia.
| Labour Rate Calculation Sheet |
| (a) |
Basic wage per week |
$590.00 |
| (b) |
Fares per week |
$45.00 |
| (c) |
Travelling per week |
$44.00 |
| (d) |
Special on site allowances: |
$_______ |
| |
Sub-total |
$679.00 |
| (e) |
Worker Cover
$ 679.00 x 6.50 % |
$44.14 |
| (f) |
Long Service Leave (if applicable) |
$N/A |
| (g) |
Redundancy pay (Refer to note) |
$50.00 |
| (h) |
Superannuation
$ 590.00 x 8% |
$47.20 |
| (i) |
Annual leave loading
$ 590.00 x 4 weeks x 17.5%/52 |
$ 7.94 |
| (j) |
Training |
$ N/A |
| (k) |
Payroll Tax. (if applicable) |
$ N/A |
| |
Total |
$ 828.28 |
| (l) |
$ 828.28 x 52 (weeks) |
$ 43,070.56 |
| (l) |
$ 43,070.56 / 40 (weeks) |
$ 1,076.76 |
| (m) |
$ 1,076.76 divided by 33 productive hours |
$ 32.63 per hour cost |
The following is a successful method in the USA.
| Labor Rate Calculation Sheet |
| (a) |
Pay Rate $16.00 x 40/hrs |
$640.00 |
| (b) |
Allowance |
$0.00 |
| (c) |
Allowance |
$0.00 |
| (d) |
Allowance |
$0.00 |
| |
Sub-total |
$640.00 |
| (e) |
Workers Compensation
$640.00 x 5.0% |
$32.00 |
| (f) |
FICA taxes
$640.00 x 7.65% |
$48.96 |
| (g) |
State US taxes
$640.00 x 4.0% |
$25.60 |
| (h) |
Federal VC taxes
$640.00 x 0.80% |
$5.12 |
| (i) |
Pensions
$640.00 x 7.0% |
$44.80 |
| (j) |
Hospitalization
$5000.00 / 52 |
$96.15 |
| |
Total |
$892.63 |
| (k) |
$892.63 x 52 weeks |
$46,416.76 |
| (l) |
$46416.76 / (44 weeks) |
$1,054.93 |
| (m) |
$ 1,054.93 / 33 hours (productive hours) |
$31.96 |
(NOTE: The rate calculated is a cost only and preliminaries, overheads and profits are added during the final summary stage of the bid.)
Copyright Paul Funnell
Author of Estimating for Plumbers
www.esti.com.au
Email paul@esti.com.au
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