Understanding how labor costs factor into project estimates is critical for efficient project management and budgeting. This article provides a comprehensive overview of labor costs, covering topics such as hourly rates, productivity, crew management, and the role of different resources in cost calculation.
Key Insights
- Labor costs for project estimates are informed by a variety of factors, including hourly rates, productivity per hour, crew size, and the required resources. These costs pertain to the installation or execution of a task rather than overhead costs.
- Proficiency in calculating labor costs requires understanding the different types of labor resources and their respective hourly rates. For instance, a journeyman and a laborer may have different hourly rates, and their combined cost per hour contributes to the total cost per linear foot in a project.
- Effective crew management can impact profitability. The size and composition of a crew must be balanced to avoid congestion and inefficiency. In some cases, having fewer journeymen and more laborers could result in more profitable and efficient work.
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Estimating labor costs. First, let's define what labor actually is. Labor is the cost to install any item or perform a task based on an hourly rate and productivity per hour.
Productivity is the amount of units that can be produced in a specific measurement of time. Let's talk about labor pricing. What we're referencing here is the cost for installation, not necessarily the overhead cost of all the people working inside the company.
If you have a cubic yard of concrete being installed on site, the labor cost is what it's gonna take to actually prepare that concrete and place it with manpower on the job site. Labor costs for estimates include multiple factors such as hourly rates, burden, productivity, crews, and resources. Labor is derived of hourly rates, crew size, and productivity per hour.
Now this might sound pretty complicated, but we're getting granular here. This all rolls up into a much simpler labor cost, but it's good to know all the increments, all the little miscellaneous components required to come up with the total overall cost of your labor. Good example is a journeyman at $50 an hour can frame 150 linear feet of wall in eight hours.
That's $2.67 per linear foot. And that is $50 an hour times eight hours equals $400 per day divided by 150 linear feet per day equals $2.67 per linear foot. Now labor resources include journeymen, laborers, foremen, et cetera.
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These are all different types of labor costs. These are referred to as resources, and each resource typically has a different hourly rate. A journeyman at $50 an hour plus a laborer at $18 an hour can frame 250 linear feet of wall in eight hours, and that equals $2.18 per linear foot.
Let's look at the calculation on that. That's $50 plus $18 equals $68 an hour times eight hours per day equals $544 per day. Divide that by the 250 linear feet of that condition, and that equals $2.18 per linear foot.
Keep in mind that it's often required that labor resources are required for a specific task, meaning that one person, for example, cannot install asphalt paving on the surface of a road if you have about 1,000 square feet. It requires a crew, it requires a team or a number of resources all at one time combined into a total hourly rate. So depending on how labor resources are utilized, they can often be more profitable depending on the crew size and how the crew is being utilized.
Crews are comprised of any combination of resources such as one foreman, one journeyman, and two laborers. That's considered a four-man crew. And some tasks require no more and no less than a four-man crew, so keep that in mind as you're pricing out labor on your projects.
If you have multiple journeymen working on a task, it could be more profitable and more efficient to actually have fewer journeymen with other laborers. In other words, you don't need journeymen necessarily to haul the heavy materials into the site for it to be installed. If you have too many installers in one area at one time, it could be problematic because then it gets too congested and not enough room for the installation to properly take place.
So keep in mind there's a balance. There's an ebb and flow to your labor. There's a comfort zone.
You gotta find that sweet spot of what it's actually gonna take to do the installation effectively or most effectively depending on the crew size. Also keep in mind that sometimes you're driven by other factors such as time. If you're in a hurry, you gotta get this job done real quick, you might be forced to actually provide more laborers all at one time or if anything, perhaps extend the work hours per mandate, which could cost more money as well.
So there's a lot of factors to take into consideration and labor resources is a combination of all the labor costs that you'll be using to install that one particular component.
