MANY of you guys have already, but if you haven’t, then I suggest you email either me or Paul and ask for a copy of our Labour Charge Out Calculator….
What is this voodoo you ask?
It’s a cheeky little excel tool that all QS’s learned how to put together when we were baby QS’s doing our study. Basically, it’s a calculation tool that helps you work out what your staff REALLY cost you so you truly know what the bottom dollar figure is that you should be on-charging them for.
Basically, we have done the donkey work of setting up the formulas in it for you, and we give it away for free so that you can plug in the amount you are paying someone at the top, and it will spit out that golden minimum charge out at the bottom. So like I said – email us, we’ll give it to you.
Calculates the forgotten parts
MOST builders get a bit of a fright when they try it out… usually their labour charge out is something they just feel the market can tolerate rather than being based on an actual calculation. They most often find that they are making way less out of a staff member than they thought…
Why? Because generally the unproductive time isn’t calculated at all. Usually there is some kind of allowance for the Kiwisaver and ACC, but these are obvious and direct costs rather than intangible ones like tea breaks and wet days.
Use it on Contractors
The cool thing about the tool is that you can use it for contractors too, it’s fully editable so all you need to do is zero out anything that doesn’t apply to a contract rate (like the KiwiSaver etc).
My hottest tip when you get hold of this tool….. is to have a copy of it for each staff member in their own files… why? Because the one thing you can always count on to change is PEOPLE. You want to be adjusting the calculation for each person as things change for them… these changes could be;
- Pay rate change (obviously)
- Benefits change, they might negotiate an extra week of leave a year with you or something like that… all that needs to be added in.
- A role change, someone who is suddenly babysitting an apprentice may have less productive time, you can allow for this in the tool.
- Personal situations may change, they might have lost a family member, become ill, having a new baby… if ANY of these things come up that might affect their long term productive time then you need to be adding it into the calculation.
If you are doing a labour only job, getting this figure right is even more important…. Why? Because you need to ensure you are ALSO getting the margin you need to keep your business running. You can blanket the hourly rate if you want to (that’s usually easier than having a different one for each person) but just keep to the golden rules;
- Make sure that the rate you charge out is NO LESS than the minimum charge-out rate for your most expensive guy
- That the margin you charge on top of this rate is also calculated correctly (check out my other blogs) so you can keep all the wheels running on your business.