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Old 06-11-2020, 12:04 PM   #1
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Default Direct Labor Cost *PayRate/Burden%*

i have a quick question fellas i live in a southern state, florida performing mostly commercial work new construction to commercial remodels to be exact. The going rate for a licensed journeyman is 22$/HR. When i bid my projects i charge the client 25$ per man per hour for pay rate. Then i charge an additional 15$ per man per hour on top of that payrate for burden costs to cover (benefits, workmans comp etc.) my question is what are the payrate/burden% you guys use in your estimates also should i raise my payrate and burden? the numbers work fine for me now but im wondering if i can get away with charging a bit more. also let me include the fact that i pay my guys 22$ an hr
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Old 06-11-2020, 01:00 PM   #2
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Put your hard hat on, you are going to get A LOT of rough answers.
I'll start, if you are very busy raise your rates by 50%
Rinse and repeat over and over till you find that sweet spot.
I did this and was able to keep my better customers at the lower rates, and had unlimited work from them. Not saying their rates did not go up but not as much.

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Old 06-11-2020, 02:37 PM   #3
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the going rate..........


Sounds like that's your break even number. I'm not in business to break even
Just like @just the cowboy said. If you are busy, charge more. Do nice work for your customers, answer/return their calls and show up when you say you will. You will find that if you take care of those, the $$ or better yet $$$ /hour you charge is less relevant to your customer.
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Old 06-11-2020, 02:39 PM   #4
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Where is the profit? It looks like your company is making less than minimum wage on each one of your guys, what’s the point?
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Old 06-11-2020, 03:15 PM   #5
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I don't pretend to know what the going rates are across the continent, but I charge almost triple that and the phone keeps ringin'.
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Old 06-11-2020, 09:11 PM   #6
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I don’t see how you can charge that low. You’d go broke or you only make money on the materials. In Georgia 20 years ago at a Fortune 100 chemical company I could get $35/hour rates. But these days it’s $55-65 typically for labor rates for journeymen. Specialists like say a Square D drive specialist out of state run $250-350 per hour. If I was paying for say field electricians as an embedded crew (we supervise) on a long term contract so that basically you are just a pass through then $37/hour makes sense. But otherwise you probably need to double that. I’ve worked all over the Southeast so I can pretty much tell you those are typical numbers based on working both sides (bidding and contracting work out).
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Old 06-13-2020, 07:49 AM   #7
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i have a quick question fellas i live in a southern state, florida performing mostly commercial work new construction to commercial remodels to be exact. The going rate for a licensed journeyman is 22$/HR. When i bid my projects i charge the client 25$ per man per hour for pay rate. Then i charge an additional 15$ per man per hour on top of that payrate for burden costs to cover (benefits, workmans comp etc.) my question is what are the payrate/burden% you guys use in your estimates also should i raise my payrate and burden? the numbers work fine for me now but im wondering if i can get away with charging a bit more. also let me include the fact that i pay my guys 22$ an hr
Does that include your OH&P?
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Old 06-13-2020, 08:02 AM   #8
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i have a quick question fellas i live in a southern state, florida performing mostly commercial work new construction to commercial remodels to be exact. The going rate for a licensed journeyman is 22$/HR. When i bid my projects i charge the client 25$ per man per hour for pay rate. Then i charge an additional 15$ per man per hour on top of that payrate for burden costs to cover (benefits, workmans comp etc.) my question is what are the payrate/burden% you guys use in your estimates also should i raise my payrate and burden? the numbers work fine for me now but im wondering if i can get away with charging a bit more. also let me include the fact that i pay my guys 22$ an hr
And.
This is my competition, paying **** wages, and then not even knowing how to run a business. I don't think he will make any money unless he hires prison labor from the state at 2 cents per hour.
This is exactly why the self-loathing south will never see the financial light of day.
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Old 06-13-2020, 10:13 AM   #9
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And.
This is my competition, paying **** wages, and then not even knowing how to run a business. I don't think he will make any money unless he hires prison labor from the state at 2 cents per hour.
This is exactly why the self-loathing south will never see the financial light of day.
Not just the South.

Hired a new guy this week who was working for the competition. Found out they are charging $65 per hour. He was making $25 per hour and no bennies.

They just couldn't afford to pay more or for bennies.

No kidding they couldn't.

It just amazes me that they have the ability to stay in business.
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Old 06-13-2020, 10:14 AM   #10
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Not just the South.

Hired a new guy this week who was working for the competition. Found out they are charging $65 per hour. He was making $25 per hour and no bennies.

They just couldn't afford to pay more or for bennies.

No kidding they couldn't.

It just amazes me that they have the ability to stay in business.
$65 in your area??
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Old 06-13-2020, 10:19 AM   #11
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$65 in your area??
Not the Bay Area market, the Central Valley market. It's night and day between pay scales in those areas. A difference in Union scale is about $30 per hour between the two places, about 80 miles apart. One has no housing under $1.5 million the other has them for $300-400k
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Old 06-13-2020, 10:23 AM   #12
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I triple the hourly rate.
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Old 06-13-2020, 12:12 PM   #13
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I triple the hourly rate.
this is a good way to estimate it if you not sure how to calculate it for your business
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Old 06-13-2020, 12:23 PM   #14
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this is a good way to estimate it if you not sure how to calculate it for your business
I think one of the most important cost to calculate is:
What are your costs per day even it no one works? In other words, the total cost of overhead, insurances, vehicles, utilities, computers, office, licenses, etc., per day.

Divide that total by the average number of days worked per year - without overtime. Usually between 200 and 250 days per year.

Once you know your cost or doing business, you can add to calculate an hourly rate.
Gross payroll + employers taxes and contributions + workmen's comp + health insurance + IRA contributions + vacation and sick pay + cost of doing business + profit = hourly rate.
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Old 06-13-2020, 01:35 PM   #15
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this is a good way to estimate it if you not sure how to calculate it for your business

It’s not far off. The burden tends to be roughly equal to the hourly rate more or less just to cover employee costs IF you can keep them 100% employed so roughly 2000 hours a year billables. But that is for a large company with stable situations like say an industrial plant maintenance crew. If it’s construction or contract work then you have to cover downtime somehow. If you run a typical 4-8 man shop then your time as salesman, payroll, etc...all has to count somewhere. So tripe the hourly rate is in the ball park.

Most companies are charging 15-20% for materials. You can figure 7% sales tax most places and 3% shipping so you’re pocketing 5-10% or you could figure that as your other costs like your time on estimates, quotes, orders, etc. So that’s a break even number. On the labor side if you’re paying $22/hour the employee probably costs you $40-45/hour depending on your benefits package. So it’s obvious why they charge more like $55-75/hour for apprentice/journeyman labor.

The average rates from the large contractors are all updated periodically in the NECA Manual of Labor Rates. Get a copy for estimating.
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Old 06-13-2020, 07:48 PM   #16
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You have to base your rates on 1000 billable hours per year or you will fold.
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Old 06-14-2020, 09:11 AM   #17
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I was looking at some state website and looks like Florida has the lowest wage rates in the USA; is that because it is mostly retirees there working part-time? The wage was about $21 USD (2019)

New York (New York City, was specifically mentioned) as being the highest; I assume that is simply do to the cost of living there. The wage for the state was listed at $27 USD (2019)

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Old 06-14-2020, 09:37 AM   #18
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I was looking at some state website and looks like Florida has the lowest wage rates in the USA; is that because it is mostly retirees there working part-time? The wage was about $21 USD (2019)

New York (New York City, was specifically mentioned) as being the highest; I assume that is simply do to the cost of living there. The wage for the state was listed at $27 USD (2019)

Cheers
John
That number for New York is most likely skewed by the large New York State which is made up of a lot of rural areas. If looking at the New York City metro area including my area of New Jersey, the cost-of-living is double Florida.
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Old 06-17-2020, 08:20 AM   #19
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Thanks guys for the replies,

I hear what some of you are saying by "tripling" my hourly pay rate, but here's the problem with that. When bidding larger scale projects 500,000.00+ it is very critical that my labor, and burden if as accurate as possible. A small increase of a few dollars can inflate my labor cost by over 50 grand on a project that size. My company has been operating fine with our current labor rate numbers. I do operate in the state of Florida -low pay scales, and super competitive market. If I want to win these projects, I cant get too carried away. Tripling my numbers would put me out of business. Thanks for your answers guys, and keep them coming!
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Old 06-17-2020, 10:54 AM   #20
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Thanks guys for the replies,

I hear what some of you are saying by "tripling" my hourly pay rate, but here's the problem with that. When bidding larger scale projects 500,000.00+ it is very critical that my labor, and burden if as accurate as possible. A small increase of a few dollars can inflate my labor cost by over 50 grand on a project that size. My company has been operating fine with our current labor rate numbers. I do operate in the state of Florida -low pay scales, and super competitive market. If I want to win these projects, I cant get too carried away. Tripling my numbers would put me out of business. Thanks for your answers guys, and keep them coming!
Only you know your situation, and what works best for you. If you are feeding the kiddos and have money to put gas in the boat each weekend then its obviously not the worst situation.

That's my reasoned and careful answer.

Now, the truthful answer if that counts for anything anymore - I am still picking my jaw up off the floor. I don't see any room for profit on that rate and the way you are doing it. My labor rate per man is ROUGHLY 5X the hourly wage I pay them. I have young guys who are learning and growing, they will be up to the 20-25/HR pay range soon enough, but for now I am enjoying 5x. I cannot imagine doing any less than 4X per hour. I just see so much need for the business to run, grow, maintain, adapt, put money away, pay me a handsome salary, and keep my boat motors in pristine condition - to accept any less. I don't know your market, but some of those big commercial jobs come around here from time to time, and yes they are competitive, and no I couldn't win with those rates. So I don't even bother any more. I'd rather take less work and make more money than work my ass off for a few extra pennies at the end of the year.

But that's just me, and its a lot of assuming that you aren't somehow turning a decent profit. At the end of the year, what kind of Net Profit are you seeing? I see 25% and that's after I buy pretty new trucks and stuff I don't really need. After I max out my contributions to my retirement. After I pay myself very well for the little actual work I do anymore. Ive also doubled sales since last year without adding more employees. Raising prices constantly. Ignoring jobs and calls where I can't charge top dollar. Ignoring calls from low income addresses. Ignoring contractors. Just cherry picking. I will stay small like this forever. This works for me.
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