Building Unique Labor Burden Analysis in the Real World

You, your construction company, and how you do business are all different from your fellow contractors. That’s because you (and your contracting business) are unique. Just as no two snowflakes are alike, no two construction companies are alike. And that is why construction contractors must establish, regularly update, and use the information obtained in a labor burden report.    

Unique Snowflakes

The National Oceanic and Atmospheric Administration tells us, “The ice crystals that make up snowflakes are symmetrical (or patterned) because they reflect the internal order of the crystal’s water molecules as they arrange themselves in predetermined spaces (known as “crystallization”) to form a six-sided snowflake.” They go on to tell us why no two snowflakes are exactly alike. “. . . because individual snowflakes all follow slightly different paths from the sky to the ground —and thus encounter slightly different atmospheric conditions along the way. Therefore, they all tend to look unique, resembling everything from prisms and needles to the familiar lacy pattern.”

Did you notice that while each snowflake is different, certain qualities are the same for all snowflakes? For instance, they are symmetrical and six-sided. What makes them unique is that they all follow slightly different paths and encounter somewhat different atmospheric conditions as they fall. 

The unique labor burden for your construction business is based on the fact that you follow a different path and your business encounters different conditions.

Unique Labor Burden from the Ground Up 

We find that some of our clients come to us with non-existent data concerning labor burden (typically brand new startups) or with data that can’t be trusted. 

In those cases, we often start with the owner's gut instinct and our own. After we have built or renovated a trusted 3 to 6 months of data, we use that information to construct a unique labor burden report. At that point, we are still evaluating the data's relevance.

For instance, because one of our clients believes (up until recently) they had a bad actor filling one of their Superintendent spots who was either stealing from them or, at the very least, incompetently buying useless products, we have agreed with them that we'll be cautious when using that data.

Labor Burden: Construction Crews vs. Service Teams

If you’re wondering if there is a difference between regular construction crews and service teams when compiling labor burden reports, the answer is no. Labor burden is labor burden. 

Yet, the patterns differ, so it is best to do separate calculations for different departments. The methodology remains the same.

3 Steps To Labor Burden Set Up

At The Profit Constructors, we use a simple 3-step process. 

1. Depending on the client's scope of work, the onboarding specialist is in charge of setting up or helping the client set up a structured labor burden analysis. 

2. Again, depending on the client’s scope of work, the bookkeepers are in charge of maintaining or helping the client to maintain it. 

3. The information gained is used by entering the data into the proper software.

Labor Burden Is NOT Static 

Labor burden is not a static concept. Good labor burden requires periodic review, maintenance, and revision. A fluctuating workforce, updated pay status, new or changed employee benefits, and even legal requirements can affect the data compiled to determine the labor burden. 

What’s Next In Labor Burden

In our next (and final) post in this series, we’ll examine how labor burden affects Estimates and Job Costing. 

Ambitious Construction Contractors look to The Profit Constructors to provide advocacy in dealing with:

• Clients and customers

• Employees and subcontractors

• Vendors and service providers

• Governmental entities 

Working with The Profit Constructors gives Construction Contractors the means to organize their operations in ways that help them:

• Remain informed

• Avoid hassles

• Reduce risks

• Be future-ready

Ready for action? Or want to know more? Get in touch today to schedule a complimentary discovery call. 866-629-7735