The True Cost of Labour in Construction: Everything You Need to Know
Fully Burdened Labour Cost: This chart is based on our overhead to reflect the difference between wage and burdened labour cost. Source & copyright: mtlcontractors.ca. May be reproduced with permission and credit.
Construction is a vital part of the economy. It employs millions of people and contributes billions of dollars to GDP. But what is the true cost of labour in construction? Many people think that the only cost is the hourly wage, but there are many other costs that need to be taken into account.
In this blog post, we'll discuss some of the different costs associated with labour in construction. We will provide clarity regarding what these costs are and how they add up. So, if you're thinking about starting or expanding a construction business, read on! If you're a homeowner in the market for renovations, this can provide some insight into the prices you'll receive!
The first cost that must be considered is the baseline hourly wage. This is the amount that the worker takes home before taxes. In addition to the wage, there are company contributions for workplace health and safety coverage, sick days, vacation pay, uniform, safety equipment, consumables and tools, etc. There is also a portion of the overhead, which includes work vehicles, the business's office, contractor's licensing, insurance, management and accounting software and much more. These are all costs that must be considered when calculating the true cost of labour in construction.
Next, we need to consider productivity. In construction, productivity is often measured in terms of output per hour worked. For example, a worker who can lay two hundred tiles in one hour is more productive than a worker who can only lay one hundred tiles in the same amount of time. Productivity levels can vary depending on the type of work being done, the experience of the workers, and many other factors.
One of the most important factors in productivity is experience. A construction worker who has been working for ten years is going to be more productive than a worker who just started yesterday. This is because the experienced worker has developed the skills and knowledge necessary to work efficiently. The inexperienced worker, on the other hand, is still learning how to do things and is not yet as efficient.
Another important factor in productivity is the type of work being done. Some types of construction work are simply more labour-intensive than others. For example, excavation work requires a lot of digging and moving heavy equipment around. This is much more labour-intensive than painting or doing carpentry work. As such, it takes longer to complete and costs more per hour.
In construction, as with any business, there are both direct and indirect costs associated
with overhead. The direct costs are easy to identify and include things like the purchase price of a work vehicle or the monthly rent for office space. Indirect costs are more difficult to quantify but no less important; they include items like the salaries of office staff or the cost of accounting software.
In order to get a true picture of the costs associated with overhead, it's important to consider both the direct and indirect costs. Only then can you make informed decisions about where to cut costs and where to invest in your business. With a clear understanding of the true cost of overhead, you'll be able to make decisions that will help your construction business succeed.
Overhead can have a significant impact on a construction company's bottom line. In fact, it's not uncommon for overhead to account for 20% or more of a company's total expenses. That's why it's so important to understand the true cost of overhead and how it affects your business.
Manage The Unavoidable
In conclusion, there are many costs associated with labour in construction. The true cost of labour is much more than just the hourly wage. It includes company contributions, overhead costs, productivity, and experience. When starting or expanding a construction business, it is important to take all of these factors into account. Doing so will help you to accurately estimate the cost of your projects and ensure that your business is profitable.
No matter what steps you take to reduce overhead costs, it's important to remember that these costs are an essential part of doing business. Overhead is not something that can be eliminated completely; rather, it should be managed in a way that minimizes its impact on your bottom line. With a clear understanding of the true cost of overhead, you'll be able to make informed decisions about where to cut costs and where to invest in your business. With a clear understanding of the true cost of overhead, you'll be able to make decisions that will help your construction business succeed.
Montreal Contractors is a qualified company, holding an active bonded license as a General Contractor and Specialized Contractor with the Régie du Bâtiment du Québec (RBQ License: 5767-5480-01), ASP Health & Safety Certification and a $2M liability policy. Our employees have all passed background checks, are registered with CNESST and have their ASP Health and Safety certification.