DID YOU KNOW that if you neglect to account for unproductive non-billable time when you go to figure out your Real True Wage(s) for your personnel you could be unwillingly and unintentionally giving your clients a 9-14% discount on your company’s Labor (I modeled out a couple of scenarios this afternoon to get those numbers),
I re-read Michael Stones Overhead & Profit Re-visted and skimmed through my copy of his original version as well as my old Walter Stoeppelwerth book Professional Remodeling Management and neither of them mention a method or the importance of setting Real True Burdened Wage Costs.
Reposting some of what I posted on the topic the other day…
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…For starters it was Friday July 31st 1987 (I still have the registration and materials from the seminar on my bookshelves) where if first learned the importance about determining the Real True Cost of an Employee. While I may very well have heard it taught and discussed before that I clearly remember that afternoon how it really sank in and how I was gong to have to eat the cost of all those paid holidays I had been giving my 16± employees.
The Real True Cost of and employee that you use in an estimate has to include considerations for the cost of the time for an employees non-billable time,… for stuff like this: Paid Time Away, New Year’s Day, Memorial Day, July 4th, Labor Day, Thanksgiving, Religious Holidays, Vacation, Sick Leave, Other Days Off, Training/Conferences, Admin & Coaching Breaks, Errands, Shop Time, Prep-Time, Problem Solving Non-billable work, No work available time, Social Security, Medicare, FUTA, State Unemployment, Other State Tax, Uniforms/Company Clothing, Worker’s Comp Insurance, Health/dental insurance, Life Insurance, Disability Insurance, Retirement Benefits, Union Costs, Cell phone, Travel Mileage, Bonuses, Profit Sharing, Commission, Seminars & Training, Laundry, Uniforms, Gifts, Parties, Meals, Employee Relations, Supplies, Tools, Tech, Small Equipment Costs, and Production Support/Supervision. (That’s Diane Gilson’s @ InfoPlus Accounting’s list).
[…snip…]
Diane Gilson has a great Excel tool for working with Employee costs with some kool bells and whistles called the eCPA Employee Cost & Pricing Analyzer for up two 40 employees in 6 divisions at $497.
My Capacity Based Markup Excel Workbook does the same basic computations for up to 6 Employees but is unlocked and the user can modify it for more employees and divisions but also compute a Capacity Based Loaded Labor Rates for $35.
And Shawn McCadden created a simple free workbook (The Hard Cost of Labor Worksheet Template) that handles a single employee (use a separate workbook for each employee) and I’ll leave the links to those below.
And there are even more Employee cost calculators out there from simple to very complex. This is where I like to say “The Idea Is To Be Mostly Correct Rather Than Absolutely Wrong” so for most remodeling contractors the simple workbooks are fine.
I have a one hour recording of a webinar Diane Gilson gave which was a detailed discussion of the TRUE cost (and profit-potential) for each employee LHr but I do not have the rights to publish it but the real important parts of that webinar are also in this video she did for Chief Architect.
Discover Your True Cost (and Profit-Potential!) for Each Employee Labor Hour – YouTube
• Are you under-billing for your employees? 06:00
• Clear, Truthful Measurement of Labor Costs 11:54
• More Accurate Estimates & Markups 25:07
• Enhanced Labor Processes & Efficiencies 35:17
• Data to Minimize Your Current & Potential Team 43:30
• Employee Costs: The Ultimate Checklist! 46:56
