May 9, 2020 – Across Canada, a common estimating mistake is costing electrical contractors money!

Many electrical contractors are just breaking even on a job when they had expected a profit. They are working hard to estimate the hours properly, they are double checking their materials lists and costs, and they are watching their expenses. They are verifying the hours and work done on the job, but are overlooking a significant calculation.

What is it? Labour burden.

Labour burden is defined as the cost of an employee, whether on salary or an hourly rate. It is a combination of the amount the employee is being paid, along with all the expenses an employer pays for having that employee.

When calculating labour burden, the following items need to be included: government deductions, benefits, vacation pay, statutory holiday pay and insurance. Many employers are also paying other expenses on behalf of their employee. Labour burden can add a significant percentage to the hourly rate of an electrician.

The mistake that many contractors are making is they are using the per-hour rate they are paying their employee and not the per-hour rate and the labour burden when estimating the labour price for a job.

Is your company making this mistake? When was the last time you reviewed the labour burden for your employees?

About the authors…

John F. Wiesel is the president of Suderman Estimating Systems Inc., and has been estimating and teaching estimating since the early 1980s. Dan Beresford served as an electrician in the Canadian Navy, then worked in various roles in business and the electrical sector before joining Suderman as training & development coordinator and business development manager. Suderman’s courses are Gold Seal Accredited by the Canadian Construction Association. Visit www.sudermanestimating.com.

This article—along with other great content—appears in the May 2020 edition of Electrical Business Magazine.