This tool helps you understand how much your tradies—your labour—costs you as it relates to your quotes.
When you quote for a job, somewhere in there is an allowance for labour, in hours (whether you actually estimate the hours or you use unit rates, there’s still a time allowance).
It’s common to equate your labour cost with the hourly rate you pay people, but you pay them for more hours than they actually spend working on jobs—the hours you allow for in your quotes.
They have paid holidays (if they’re an employee, not if they’re a subcontractor), apprentices have TAFE, and everybody has smoko, toilet breaks, toolbox talks, and other unproductive time. This tool helps you allow for that, so you understand your cost of labour as it relates to your quotes.
Tradie Labour Cost Calculator
How To Use
Select the worker type, enter the hourly rate you pay them, and select whether you pay them super and for workover. Enter the holidays they get paid, the sick days and public holidays, any TAFE days, or an estimate of how many days a year you get rained off.
Enter the hours in your working week; check the super percentage is correct. If you’re in NZ, the minimum is 3%.
The efficiency rate is an important factor now—we’ve covered holidays and super, but your people don’t work “charged hours”all day long. There’s smoko, toolbox talks, looking at their phones, driving between jobs, etc.
The best way to know the percentage of time spent on charged work is to measure it using their timesheets. If you don’t have that info, here’s some guidance to help you estimate it.
If you’re a construction trade—builder or subcontractor—where your people are on a single site all day, 80% is reasonable. So, they spend 1 hour 36 minutes of an 8-hour day on non-charged stuff.
For maintenance trades who drive between jobs, it’s less—65 or 70% perhaps, less if the traffic is bad.
If you charge day rates, your efficiency is 100%, of course.
Press calculate, and you’ll see your cost per charged hour—that is your cost of labour.
Now you’ve calculated your labour cost for that person; you can repeat this for all your people and calculate your average cost of labour. Then you can think about your charge-out rate and the margin you make on your labour.
You should make enough margin on your labour AND materials to cover your overheads and the risks and cock-ups that affect all businesses AND still make a net profit margin of 10%.
Are you charging enough?
Understanding your costs, your pricing, and your margins is part of building a healthy and sustainable business.
There’s plenty more, though.
If you want to build your business properly—with a net profit of 10% of revenue
AND a wage for you
AND a 40-hour week for you and people in their jobs doing a good job
—then maybe business coaching is going to help you.
You can watch the video 👇 and book a short call 🤙 🙂 to start the process of finding out.
Next Step:
BOOK A 10-MINUTE CONSTRAINTS BUSTER CALL WITH A SCALE SPECIALIST
If you run a TRADE business doing over $25k per month or a CONSTRUCTION business doing more than $50k per month, you’re a few simple steps away from DOUBLING your revenue and profit and HALVING your stress.
In this call we’ll look at what systems you should be setting up to:
- Get work into your business
- Get that work done, profitably and easily; and
- Get maximum performance out of your people.
