Do You Know Your True Labor Burden Costs?
Labor burden is the actual cost of a company to have an employee, aside from the salary the employee earns. Labor burden costs include benefits that a company must, or chooses to, pay for employees included on their payroll. These costs include but are not limited to payroll taxes, pension costs, health insurance, dental insurance, and any other benefits that a company provides an employee.
Company paid time off such as paid sick, holiday or training time must also be considered as part of the Labor Burden as it is a cost to the company.
Labor burden cost is important to compute and understand because it includes a variety of significant costs that are often viewed as company overhead, but are in fact, costs related to employment. Many businesses fail because they focus simply on payroll and payroll taxes, and neglect to consider the entire actual cost required to enable an employee to perform their work.
Overhead should be spread out over all of a company's income-generating employees based on the hours they work (Example: A part-time employee working 20 hours a week will absorb half as much company overhead as would a full-time employee at 40 hours per week.
Fully-burdened costs for individual employees can be expressed as a yearly total to provide an estimate of how much the company will spend that year on an employee. It can also be expressed as an hourly cost by dividing the total yearly cost by the number of hours the employee will work. This number is often 50% to 150% higher than the gross hourly wage. As costs are often used as the basis for pricing services or products, this is why it is so critical to obtain an in-depth understanding of the true cost of an employee.
Do You Know Your True Overhead Costs?
At its elemental level, overhead is the money you would have to pay to keep your business operating when you had no one working in the field. It includes everything except material, labor and job expenses. Office expenses, salaries, sales expenses, office equipment, vehicles and similar expenses are considered to be overhead.
For electrical contractors, overhead generally runs at between 13% and 20% of total sales. The smallest contractors generally have the highest percentages of overhead, and very large contractors have the lowest percentages. Remember, however, that these are averages, and any particular company may have higher or lower percentages, depending upon what types of work they do, their methods of doing business and their activities for a specific accounting period.
Your overhead should be the minimum necessary to keep your people in the field working at maximum efficiency. There is no certain “correct” percentage.
If the answer to any of these questions is "No”, you could be losing a lot of money.
Many of our customers started out as field technicians who made the life changing decision to start their own contracting company. Starting a business for the first time is not an easy task. You have to make the commitment to become a business person.
TurboBid is rated the #1 estimating software solution because we include the tools that are needed to help you run your contracting business the right way.
TurboBid’s "Wizards” present you with a sequence of steps that lead you through the process of identifying and accounting for the costs associated with labor burden costs, your company overhead costs, and setting up your copy of TurboBid.
What's important to understand that these costs are in a state of continual flux and need to be updated regularly. By simply updating the wizards, your estimates will always be accurate.
* Employee Name or Classification.
* The employee's skill level. Enter the employee's skill level compared to a 100% journeyman. This will add additional labor hours to the estimate due to the employee's lack of productivity.
Burden & Pay Rate
* Employee Burden Group: Select the employee's burden group from the dropdown list. The hourly burden cost will be displayed. Click the "Open Burden Wizard" link to open the Burden Wizard so that you can edit the selected burden group if needed.
* Date of Future Pay Rate Increase: Enter the date of the employee's pay rate increase.
* Future Pay Rate Increase Amount: Enter the amount of the employee's pay rate increase.
* If the employee will be on a project while he receives an increase in his hourly pay rate, based upon the selected Project Start Date, Number of Units, and Units Per Week, the calculated pay rate increase will be added to the estimate.
* Hours Per Day: Enter the hours the employee will work per day.
* Days Per Week: Enter the days this employee will work per week. This will calculate how many hours the employee works per week.
* Months Per Year: Enter the months the employee will work per year. This will calculate how many hours the employee works per year.
The employee wizard walks you through all of the steps required to accurately calculate your employee's burden costs.
This video represents TurboBid's Employee Wizard. Click the Play button and explore the wizard by clicking on the red outlined buttons or symbols.
Manage Burden Names
Add, delete, or edit your list of labor burden expenses for payroll taxes, insurance, miscellaneous expenses, paid non-productive time off, paid time off, and unpaid time off.
This video represents TurboBid's Manage Burden Names Wizard. Click the Play button and explore the wizard by clicking on the red outlined buttons or symbols.
TurboBid Setup Wizard
The setup wizard walks you through setting up your required company information so that you can start using TurboBid right away.
* Company name, address, phone numbers, email address, License #
* Select the company logo to be used in your bid package.
* Overhead: Select to use the overhead rate per hour from the overhead wizard, a custom value, or a percent of cost. This value can be overridden within each estimate.
* Profit: Select a Profit %. This value can be overridden within each estimate.
* Material Sales Tax: Enter the amount of sales tax that you pay on material purchases. This value can be overridden within each estimate.
* Provides an easy way to view employee names, burden group, hourly pay rate, hourly burden, and skill level. It also includes an edit button so that you can edit these values if needed.
This video represents TurboBid's Setup Wizard. Click the Play button and explore the wizard by clicking on the red outlined buttons or symbols.