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Labour Charge Out Rates

Labour charge outs will differ depending on if you pay your guys on wages or on contract rates, and what those paid rates are. So how do you manage a team of guys who are all being paid differently?

Hate to say it, but it’s up to you.

If you have gone through and used our labour charge out calculator, then you know how much the minimum cost is to charge out your team member for so that you are covering everything. I usually recommend you keep a copy of the calculation in your files somewhere (ideally where the contracts are kept!). That way, every time a staff member gets a pay rise, you can recalculate their charge out rate accordingly.

Remember, the charge out calculator also works for guys on contract, just zero out any of the costs that don’t apply.

Minimum charge out rates cover all costs associated with having that team member, such as;

  • Holiday pay
  • Sick leave (including things like bereavement leave allowances)
  • ACC
  • Insurances
  • Non-taxable allowances
  • Tea breaks
  • Rainy days
  • Non-productive time
  • etc

the other thing to keep an eye on is Calculating productivity

If you have a senior staff member who is looking after an apprentice, then their productivity is likely to go down, meaning their minimum charge out rate may need to go up…. It’s up to you how you handle this, but it’s a cost so it needs to be factored in somewhere.

Some building companies use an average rate across the board for labour, some break it down into apprentice/labourer, qualified builder, foreman. It really depends on this size of your team. Having different labour charge out rates for everyone can create extra administration so be aware of this. It can also create issues when a qualified builder is doing what could be seen as an apprentices task….. which may mean your homeowner gets grizzly.

Personally, I think the average cost approach is better, just because it will take up less of your time. If you get a homeowner asking why they are paying the same amount for an apprentice as they are for a carpenter then advising that it is an average charge out rate should be enough to quell the confusion.

Definitely don’t get caught up in the age-old chat down at the pub asking everyone else what their charge out rate is….. it is not a market driven discussion; it is a proper calculation. You don’t want to charge less just because another guy is and find out too late that you aren’t covering your costs!

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