Even though some refer to their vehicle as their “wheels,” it would be at least a tad bit crazy to neglect putting tires on those wheels before taking a spin around town.
One of the ways I like least to spend my money is purchasing new tires for my vehicle. Another way to put it is – I don’t like buying tires! They aren’t pretty, they are expensive, and they require maintenance. But, if I neglect to buy tires for my car, I don’t get to go to the places I DO like to spend my money.
So it comes down to this – neglecting to put tires on my wheels is burdensome.
Neglecting Labor Burden is Burdensome
For construction company owners, understanding and applying labor burden is critical to accurate job costing and estimating. It isn’t simply a matter of wages. Because each employee costs you more than what you pay them hourly, it is critical to understand the actual cost. If you don’t know how much your workers cost, you’re much more likely to find yourself in a mess by underbidding jobs and losing money each time.
When you understand the labor burden, you can make more informed decisions on two critical aspects of running a construction business:
Hiring
Pricing jobs
That means effectively managing labor burden allows you to keep overhead costs down and increase profit margins while maintaining productivity.
What Labor Burden Includes
Labor costs are classified as either direct or indirect costs. Direct costs refer to the wages paid to an employee. The indirect costs are the labor burden, varying depending on each construction company. Within the labor burden portion, a further distinction is made. Some costs are considered overhead items, and others are hourly items. Following is a sample of each.
Overhead items
Pension
Uniforms
Drug testing
Company-issued cell phones or other devices
Transportation
Ice, water, snacks
Company parties
Small tools or equipment
PPE
Any other indirect costs that will change of necessity when hiring a new employee
Hourly items
Holiday pay
Vacation pay
Employee training
Safety meetings
Travel time
Simply put, you can calculate an employee’s labor burden once you’ve identified all the indirect employee-related costs.
Getting Back to Tire Burden
Although I’ve put new tires on my vehicles many times over the years, I’ve never been the one to perform the act of mounting a tire to a wheel. There are a few reasons for that:
I lack the proper tools.
I don’t have the skills required.
I’m not particularly eager to get my hands dirty. 😁
Even if I tried, it would take me a lot longer to accomplish than having a pro do it.
Keep in mind that burden rates change because of things like health insurance increases, pension fund contributions, and fluctuations in other areas. Choosing an accounting professional to help you adjust accordingly will also ease the burden.
The bottom line is that dealing with the labor burden aspect of running your construction company is best served by allowing the pros to take care of it so you can get on with the business of taking a spin around town.
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