The construction industry is growing rapidly, and so is the demand for construction materials. As a result of the increased demand for skilled workers in construction and the subsequent shortage of qualified workers, labor costs are on the rise. For this reason, the construction contractors must find an effective way to succeed regardless.
So, estimating companies must understand how to estimate labor cost in construction to stay in business. Cost estimation is a time-consuming and tedious task. Read about the top methods to determine labor costs in construction in this article.
Tips To Estimate Labor Cost In Construction
Calculating labor costs involves several methods and steps, depending on the budget, timeline and scope of the project. Here are some tips to determine building labor costs:
Structure Your Work Break Down In Detail
A WBS (Work Breakdown Structure) is a hierarchical chart that breaks a project down into manageable deliverables, activities and tasks. Developing a detailed work breakdown structure will assist you in identifying specific labor tasks needed to end the project smoothly. With the help of this, you can allocate the resources more effectively.
Use Industry Trends And Historical Data
Using industry trends and historical data can also be helpful in determining labor costs more precisely. Industry trends can provide effective guidance on norms, best practices and expectations for project productivity and labor costs. While historical data delivers insights into the overall performance of past construction projects and identifies trends.
Consider Weather-Related And Seasonal Variations
Weather-related and seasonal variations can also affect labor costs. Work that demands outdoor activities, like roofing or excavation, needs to be adjusted for weather and seasonal factors. Weather conditions can have a massive impact on overall labor productivity. For example, it can affect the performance, safety, comfort and morale of workers, causing delays. Delays in the building project can lead to more labor costs.
Account For Market And Regional Factors
Market and regional factors are also of significant importance for labor costs. Aside from this, the benefit package and labor costs vary by region, ultimately influencing the labor cost estimate. If we talk about market conditions, suich as demand and supply, they can also impact labor rates and availability. So, it’s pivotal to consider these two factors.
Use Estimating Tools And Software
Estimating tools and software play a considerable role in the construction projects. These tools are deployed to analyze the budget and viability of the building work. In short, estimating software are helpful in automating and streamlining the whole estimation process. In addition, these tools can provide data visualization, comparison reports and real-time updates, making it much easier to manage a project’s labor costs.
Identify And Allocate Direct And Indirect Labor Costs
If you want to estimate the labor costs in your building project more accurately, it is best to allocate and identify the associated direct and indirect labor costs. Direct labor costs are directly linked with the labor workforce like overtime, benefits, salaries and wages. However, indirect costs are related to the support workforce, such as administrative staff, managers and supervisors. Allocating the direct and indirect labor costs is very important to efficiently and precisely estimate the labor costs for your construction work.
Construction Labor Costs: Why You Should Control Them
Effectively controlling labor costs can garner your business in many ways. Investing in the expert construction labor cost estimator team can help keep the building project’s labor costs under control. With the help of a successful labor cost control, you can take advantage of many crucial things. Some of the reasons to control labor costs include:
Gain A Greater Sense Of Productivity
Construction managers must be capable of managing labor costs in an appropriate manner. With the help of this, they can identify potential ways to improve the efficiency and productivity of the work site. If you haven’t managed labor costs effectively, it can cause delays in finishing your task in time. Labor control is vital to be more productive.
Ensure Compliance With Regulations
Labor cost management ensures that you stay in compliance with specific labor laws and regulations, including overtime pay requirements and minimum wage laws. Failure to keep up with these laws can result in financial and legal penalties and damage the organization’s reputation. Aside from this, labor costs can also influence compliance with some critical safety regulations. If you are not able to manage the labor costs in the right way, it may result in a number of injuries, accidents and worker fatigue as well.
End Projects On Time
If you want to finish your construction work in the designated period. Then, it is equally important to manage labor resources and estimate labor costs accurately. In case labor resources are not managed appropriately, it can lead to a shortage of skilled workers. This means you have to deal with project errors and delays. Effectively controlling labor costs can help ensure that you complete your construction job within the estimated time.
Make Effective Use Of Labor Resources
On top of that, managing the labor costs helps ensure that project resources are allocated more effectively. Also, having labor costs higher than anticipated can affect the resource allocation significantly. As a result, the construction manager may need to find some extra funding to compensate for the increased costs or reduce the project scope.
Keeping Your Budget On Track
Labor cost management is crucial in controlling costs and ensuring the project ends within budget. Labor costs show a significant portion of the building project’s expenses. Thus, it is necessary to manage the labor resources and costs accurately. If the labor costs exceed the budget set for the task, it can impact the project’s productivity. Keeping the labor resources in check can reduce overhead costs and improve profit margin.
The Final Statement
Estimating the labor costs of the construction project can be a challenging task. However, it is critical for project management, resource allocation and proper project planning. By following some tips mentioned above, you can effectively make well-informed decisions and reduce risks associated with the project, increasing the chances of its success. So, you must remember that precise labor cost estimates are of significant importance to stay on budget and deliver an exceptional-quality final product.
Related Article You Must Read For Reduce Your Construction Project:
Impact of MEP Estimating in Construction Project
Frequently Asked Questions
How can I estimate labor costs?
There is no hard and fast rule to determine the labor costs. You can calculate labor costs for each hour by summing up the gross wages and total cost of project-related expenses. Now, divide the answer by the number of hours the laborers work each year.
How can I project labor costs?
You can successfully project the labor costs by following some tips mentioned below:
- Review the past construction project to estimate future work effectively
- Make sure that the staff base rates are precise. Staff base rates can be useful in determining the cost required to deploy a staff member for work of one hour only.
- Ensure to involve highly professional, skilled and capable workers in your project to take your business to heights.
What are the different labor costing methods?
There are two methods for labor cost allocation: actual cost and standard cost. Each has its own advantages and limitations. You can choose any of these methods to determine the labor cost for your construction project depending on the specific needs.
What is the expected labor hour rate?
The expected labor hour cost for construction varies for contractors, subcontractors, and workers. For example, the labor hour rate for general contractors ranges between $50 and $150 and over $40 to $50 for subcontractors. Apart from this, the labor hour rate for construction workers can be anywhere around 30 dollars, which is economical.
