A construction project’s cost is usually a combination of three main heads i.e., material, labor, and equipment. Each segment holds great value when deciding on the final budget. Inaccuracy in the calculation of anyone can cause the construction owner or contractor to suffer a lot. Cost evaluation, whether it is the labor costs of building or the quantity cost, always comes with a number of challenges that needs attentive surveillance of the estimator. All construction agencies aim to win the construction bid proposal and struggle to accomplish the project within the estimated time and budget.
When working on a construction project, the most critical factor to determine is the labor costs. Calculating the labor costs of a building is a technical and tricky phase that demands a watchful proposition and attention throughout till the end. A reliable labor cost in a construction project can favor you in two ways. Firstly, it improves the project management functionality. Secondly, it assists in running the project according to the set key performance indicators benchmark. Let us know if you are having a problem estimating your construction labor cost. We are here to help you out. This article has explored for you the way to estimate labor costs correctly and the updated mechanism required to do so.
Requisites of Construction Labor Cost Evaluation
Labor costs significance is equivalent to other cost factors of any construction project. These are the derivation of all those expenditures that cover the remuneration of the workers who work out to complete the construction building project. The variation in the labor costs of building is due to certain diversities. It includes the type or scope of the project, the construction site, and the work nature.
The labor costs also fall into the categorization of direct and indirect costs like other construction elements. Its direct costs encompass the labor’s wages, salaries, allowances, benefits, and taxation. Indirect costs, on the other hand, include all the cost incurrence paid during workforce management. It encompasses all the costs associated with the recruitment, training, and administration of the workforce. A hint for estimating labor cost correctly is that you should be well-versed with the project’s scope, the time period of the project, and the level of skill required for a particular project. By knowing so, you can easily judge the total number and type of workers and their time consumption on your project.
Determine the Base Rate of A Particular Place
An accurate project quote preparation is a good practice for stabilizing your profitability. In this, you have to know well about the base rate of the specific location where the project is to be carried out. The base rate is the set unit wage rate of labor on an hourly basis. This rate can change based on the technical skills and experience of the laborers. The size of your workforce helps in determining the base rate for your project. It is subject to change from location to location. For example, there are four workers working on a construction project of varying ages, specialties, and skills. The wage rate of each is then specified as follows:
- 1st worker rate is $45/ hour
- 2nd worker rate is $35/ hour
- 3rd worker rate is $20/ hour
- 4th worker rate is $10/ hour
On viewing the wage rate patterns of these four workers, the base rate of your area is $110/ hour.
Evaluate Labor Burden on Your Project
The labor burden is the amount that the company pays to the laborers out of the regular wages. These payments are in the form of, allowances, benefits, perks, and insurance per year to all workers. The amount allocated to each head for every worker is then accumulated to determine the total labor burden on the project. The construction estimator has to add this amount to the final estimation for 100% accuracy.
Methods for an Authentic Labor Costs Assessment
Nowadays, various estimation methods are in the practice of construction estimators to estimate the labor costs of building. Have a look at some most common ones:
Insertion of Historical Data
A reference to the historical date of identical projects completed in the past is counted as the most authentic source of estimation. Information from past projects is a good indicator for the calculation of labor costs for a project. Estimators can use this data to stay in line with the industry benchmarks and to analyze the ongoing patterns to estimate labor costs accurately.
Construction Estimation Software
Construction estimating software is another valuable tool that construction estimators use to estimate the labor costs of building. This software provides exact estimates based on project scope, labor rates, and project timeline. It also helps in generating comprehensive reports and cost divisions that support project management and planning.
Labor Productivity Rates
Labor productivity rates mean the total work completed by a worker in a specific time period. Estimators can use these rates to evaluate the required amount of labor for work and the time they will spend working on it. Labor productivity rates can come from multiple sources, named, historical data, industry benchmarks, or previous studies.
Expert opinion, like others, is also termed as an informative tool for the consideration of labor costs of building estimates. Experts in any construction project are referred to the contractors, estimators, project managers, and industry consultants. Their knowledge, experience, and valuable insights are significant in getting the labor costs for a project. Thus, a great help for estimators in deriving ideal labor cost estimates.
Construction estimation takes in many challenges for the estimators. Whether they are hired for a commercial construction estimating project or handed over a project of residential estimation, prudence is the ultimate demand. When it comes to labor costing, several factors can impact the final estimates. Those may include the total project scope, worker’s skill level, project duration, or location, which the estimator must take into consideration before making judgments. By doing so, not only the estimator can come at ease in providing precise budget requirements, but also the investor’s mind becomes clear for finances.