What is the REAL COST of a Week’s Worth Of Labor?

Employee Labor Burden Costs

“How much should I charge?” I have heard that question more times than I can remember, and my answer is always the same “Let’s start with your costs”

While material costs are usually clear, it is the actual labor costs where we often get it wrong. That is often the problem, and it was also for me too when I was a GC back in 2005.

Let’s take this quiz: Consider this Job – 4 Drywall Tech’s, earning $30.00/hr can complete a new home drywall job in a full week at 40 hours each. What are your actual labor costs for this job?

A) $5200.55

B) $6850.00

C) $7378.20

D) $7507.20

The fact is, before we can calculate the Actual Labor Costs, we need to know much more information on our Actual Employee Costs. In order to do so, let’s make the following assumptions before we can properly determine our costs.

1. Our company is located in California

2. The workman’s compensation Rate 15% (or $15.00 per $100 of Labor Paid)

3. We have a total of 8 Employees and a $3500 monthly company overhead

4. Each Employee Receives 1 Week Paid Holiday & 1 Week Paid Sick Leave

5. Each Employee receives $100 Monthly Fuel Reimb., $1000 Annual Christmas Bonus

6. Monthly Company Costs of $200/month health care costs & $50/month of Meal costs per employee

7. We also must figure in both Employer Paid Portions of the Federal and State Income Tax

In order to calculate the true costs of a job we must first understand our total costs per employee, per year, then we can break them down on an hourly basis.

To save you from complex math, and a headache, the Actual Hourly Costs of each employee, based on the above scenario, and including overhead is actually $46.92

So the Actual Labor Cost of a full weeks job, with 4 Employees at 40 hours for a total of 160 hours is $7507.20

From there you can add in your material costs, then add your markup.

From that point, you have a very accurate job or bid price. If you find that amount out of the job competitiveness, then you have to revisit your labor costs & benefits to see where you can cut.

If you find that you are still under market value, then you know you have room to raise prices, benefits , or markup %.

To help you with the hardest part of the above labor costs calculations I have developed this little tool that automatically calculates the Actual Hourly Cost of Labor for each employee and I would love for you to give it a try and let me know what you think. (this is an Excel application uses safe macros to save all employee data. Just click the “Continue..” button on opening)

Also here is a YouTube video showing you how it works

 

I would love to get your feedback on this.
Randy

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How to Properly Price Out Jobs To Guarantee Profits, Every Time!

Properly Price Out Jobs To Increase Profits

“How much should I charge?” or “How should I price out Jobs?” I have heard those questions more times than I can remember, and my answer is always the same “Let’s start with your costs”
While material costs are usually clear, it is the actual labor costs where we often get it wrong. That is often the problem, and it was also for me too when I was a contractor back in 2005.
Let’s take this quiz: Consider this Job – 4 Roofers, earning $20.00/hr can complete a roofing job in one full week at 40 hours each. What are your actual labor costs for this job?
A) $3200.00
B) $3850.00
C) $4378.20
D) $4908.80

The fact is, before we can calculate the Actual Labor Costs and price out jobs, we need to know much more information on our Actual Employee Costs. In order to do so, let’s make the following assumptions before we can properly determine our costs.
1. Our company is located in California
2. The workman’s compensation Rate 15% (or $15.00 per $100 of Labor Paid)
3. We have a total of 8 Employees and a $1500 monthly company overhead
4. Each Employee Receives 1 Week Paid Holiday & 1 Week Paid Sick Leave
5. Each Employee receives $100 Monthly Fuel Reimb., $1000 Annual Christmas Bonus
6. Monthly Company Costs of $200/month health care costs & $50/month of Meal costs per employee
7. We also must figure in both Employer Paid Portions of the Federal and State Income Tax

In order to calculate the true costs of a job we must first understand or total costs per employee, per year, then we can break them down on an hourly basis.
To save you from complex math, and a headache, the Actual Hourly Costs of each employee, based on the above scenario, and including overhead is actually $30.68
So the Actual Labor Cost of a full weeks job, with 4 Employees at 40 hours for a total of 160 hours is $4908.80

From there you can add in your material costs, then add your markup.
From that point, you have a very accurate job or bid price. If you find that amount out of the job competitiveness, then you have to revisit your labor costs & benefits to see where you can cut.
If you find that you are still under market value, then you know you have room to raise prices, benefits , or markup %.
To help you with the hardest part of the above labor costs calculations I have developed this little tool that automatically calculates the Actual Hourly Cost of Labor for each employee and I would love for you to give it a try and let me know what you think. (this is an Excel application uses safe macros to save all employee data. Just click the “Continue..” button on opening)

Also here is a YouTube video showing you how it works

There is also a Bids & Estimate Add on so that you can properly Price Out Jobs using your Actual Hourly Cost.

More Details on that here: https://www.labor-burden-calculator.com/get-bids-add-today/

I would love to get your feedback on this.
Randy

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What Is My Employee Labor Burden Rate

Calculating the Employee Burden Rate

With 20 Employees, I was quite embarrassed when my accountant asked me what my Employee Labor Burden Rate was, and I not only did not know what my Labor Burden Rate was, let alone how to calculate it.

That was back in 2001, and luckily for me I found out what my Employee Labor Burden Rate was before it was too late and it saved my business.

I learned that the Employee Burden Rate is  the allocation rate at which indirectly company expenses are applied to the direct costs of my employees labor. This became a critical factor when I needed to find out what the actual cost of my Employee’s were really costing me on an hourly basis. The Employee Labor Burden Rate, along with the Total Employee Hourly Burden (or Actual Employee Cost) is simple all of the costs associated with that employee, above and beyond the direct pay of the employee

Download the FREE Labor Burden Calculator Here:

Employee Labor Burden Rate
The Labor Burden Calculator
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Calculating this amount can be a bit tricky without specialized software however we can determine this Labor Burden Rate by determining the total cost of an employee on an annual basis by adding up all of the indirect (non-pay) costs, such as:

  • Employer Paid Taxes
  • Employee Benefits such as:
    • Meal Reimbusements
    • Fuel Reimbursements
    • Cash / Gift Bonuses
    • Company 401k Contributions
    • Heath Insurance Costs
    • Workers Compensation
    • Liability Insurance
  • Paid Time Off such as:
    • Vacation Pay
    • Sick Pay
    • Paid Holidays
    • Paid Training Hours
    • Non-productive hours (this is a big one)
  • Other Insurance Costs
  • Overhead – This must be evenly distributed among all employees based on their actual work hours. (In other words the amount of Overhead distributed between a full time employee is quite different than a part time employee)

To determine the Employee Burden Rate, All of these costs should then be totaled based on an annual basis to get the entire Employee Burden Total. This is the total cost of that employee, excluding the salary amount, for a company.

Next,  to calculate the Employee Burden Rate we must also determine the Actual Hours Worked in an entire year. This is the total hours paid for an employee for a year, minus, the total paid, but non worked hours.

Total Net Employee Hours = Total Annual Paid Hours = Total Annual Paid Non Worked Hours

Now that we have both the Employee Burden Total and the Total Net Employee hours, we can simply divide the amounts to get the Employee Burden Rate

Employee Burden Rate = Employee Burden Total / Total Net Employee Hours

Doing the math can get a bit complicated when dealing with both Overhead and multiple Expense Frequencies. You can actually save tons of time by downloading the the FREE Labor Burden Calculator which does all of the above in just seconds

Feel free to give the FREE Labor Burden Calculator a try here:

Name:
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How To Calculate Your Employee’s Actual Hourly Cost

Calculate Your Employee Actual Hourly CostWhile it may sound quite insignificant, calculating the Actual Hourly Cost of your employee is one of the most critical functions of a business

Without knowing this cost, it’s impossible for any business to be able to understand their true operating costs, which is an extremely dangerous practice. Determining your Actual Hourly Cost can be a massive headache at times.

In fact, back in 2001, I despised accounting and I didn’t know what Labor Burden was, nor how to generate a Profit & Loss Statement was or a care how to evaluate a Balance Sheet.

Well it turns out that owners and managers today can take full control of their Employee Expenses, without the need to know a single formula or require any spreadsheet experience. I’m going to share this with you today.

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3 Steps On How To Calculate Your Employee Labor Burden

Employee Labor Burden Costs

Here are 3 Easy steps to understanding the critical cost of the Employee Labor Burden

Essentially, Labor Burden is the employee cost to a company beyond the salaries it pays the employee.  This means all of the other costs associated with having employees which is known as the “Labor Burden” or “Employee Labor Burden” for companies. This is extremely important because owners and managers must understand the Total, or Actual, cost of the Employee. Without understanding these actual costs, companies and their owners or managers cannot accurately estimate costs per hour, day or month for budgets and Jobs.

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The REAL Cost of an Employee Smoke Break

Real Cost of an Employee Smoke Break

While I knew hiring an employee who smoked had its costs, I never realized just how much an employee smoke break was costing me until I sat down and added it up one day. I nearly fell off my chair. A total annual cost with just four -10 minute smoke breaks a day was costing me nearly $7,300 USD a year! Here is how I calculated it and you can do the same.

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The 5 Worst Types of Employee Theft and How To Stop Them


Have You Experienced  Employee Theft?

If you are like me and millions of others you have personally witnessed one of the costliest and most devastating issues facing any company today and that’s the blatant theft of a companies assets by its employees. As a former contractor with over 20 employees I myself have fallen victim to each and every one of these at one point or another, and to succeed, I had to overcome all of these challenges. In this article we are going to address 5 of the worst types of employee theft and  how to put systems, software & solutions in place to prevent or stop these thefts before its too late.

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How Much Should I Charge? This 8 Step Method Teaches You Exactly How to Calculate The Right Job Sales Price, Every Time!

Employee Cost Breakdown

Determining Your Billing, Job, or Bid Cost is critical to Calculating the correct Job Sales Price . These 8 Steps shows you just how to do that

As a former Contractor, I made every mistake possible and nearly lost it all in 2001 when I was hundreds of thousands of dollars in debt and nearing bankruptcy. One of the main reasons I had gotten in so deep was a simple lack of understanding on how to calculate an proper job sales price. Lucky with some timely consulting I was able to learn some very critical lessons which put me on a path to success and finally selling the business in 2005 for a considerable amount. Since then I have dedicated my new career to creating software and solutions for small and medium size business by bringing them the much needed systems, frameworks and know-how that enabled me to overcome serious debt incurred and nearly running my business into the ground.

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What is the REAL Cost of an Employee? Follow these 7 Steps To Calculate Your Actual Employee Cost & Labor Burden

I think you will agree with me when I say:

Employee Cost Breakdown
A Profitable Employee Breakdown of Costs & Profit Margin. Overhead is distributed on Employees proportionally based on Actual Hours Worked

Accounting can be a massive headache at times. In fact, back in 2001, I despised accounting and I didn’t know what Labor Burden was, nor how to generate a Profit & Loss Statement was or a care how to evaluate a Balance Sheet.

Well it turns out that owners and managers today can take full control of their Employee Expenses, without the need to know a single formula or require any spreadsheet experience. I’m going to share this with you today.

Read more

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