In This Article
Construction projects are expensive, but labor is the most expensive cost. If you aren’t monitoring your spending you may not know how to estimate construction labor cost and therefore, it’s easy for it to get out of control. But that doesn’t mean that you need to spend all your time in your office managing your spreadsheets.
With the right software and the right processes, you can learn how to estimate your construction labor costs accurately and quickly. We’re going to show you a few ways to evaluate your construction labor costs—without getting bogged down with the numbers.
How To Estimate Your Construction Labor Costs In-Progress
You’re in the middle of a project. How much has labor cost you so far? Are you still coming in under budget?
Estimating in-progress labor is a matter of pulling real-time, accurate labor progress reports.
Track Your Labor Hours Accurately
Workyard accurately tracks employee hours through GPS-powered, geo-fencing technology. Once an employee logs in, Workyard tracks and assigns hours based on the employee’s location. When you need to check on an employee’s current hours, you just have to log into the platform.
Pull a Real-Time Construction Labor Report
Check on the progress of a specific site by pulling a real-time construction labor report. In Workyard, you can see all the hours allocated to the project—and how much it has cost you.
Add Your Labor Burden
If your real-time construction report doesn’t include labor burden, don’t forget to add it. Your construction labor burden includes all the indirect costs of your labor, such as payroll taxes or insurance.
Now you know how much your in-progress work has cost you thus far. Take a look at your project’s tasks and milestones to determine whether you’re still on track. It’s better to adjust your expectations (and your client’s expectations) earlier rather than later.
How To Estimate Your Construction Labor Costs for Bids
To create a solid estimate, refer back to previous projects. As long as you can establish a baseline for how long a project should take, you can calculate your full labor burden.
Pull Reports From Similar Projects
You can use Workyard to refer back to previous projects by pulling reports by project and site. Look for projects that are similar in demand and scope to estimate how many hours the project will take.
Calculate Your Labor and Labor Burden
Use the hourly estimates to calculate how much your labor (and associated labor burden) will cost. Use your current work rates, as they may have changed since you completed the previous projects. Always include a reasonable buffer.
Assess Your Project for Potential Risks
Are there any risks unique to the project that might mean that it takes longer? If so, build those risks into your estimates. Conversely, if you believe there is a reason this project will take much shorter than other similar projects, adjust accordingly.
By having accurate data and pulling the correct construction cost reports, you can quickly see how much previous jobs cost you and project that information to future bids.
Analyze Your Labor Costs
You aren’t always analyzing your labor costs for future bids. Sometimes, you just want to know whether your labor is operating as efficiently as possible.
Here are a few ways to analyze your labor costs.
1. Compare the Cost of Jobs
Are your labor costs going up or down? Take a look at previous projects to identify any potential shortfalls or overages.
As you analyze your labor costs, you may find that some jobs just aren’t worth it to take—they may just take too many work hours. You may also find that some jobs are much more profitable than others.
2. Compare True Costs to Bids
How far off are your estimates? If you’re consistently coming in 20% over or 10% under, you can use these comparisons to adjust.
Ask yourself why your estimates are off. Are you running out of time on projects? Or are scheduling mistakes leading to confusion and overtime?
3. Compare the Effectiveness of Teams
Are there some teams that seem to deliver work much faster than others? Do some teams do better on specific types of projects? Use this information to increase your construction productivity. Assign the right employees to the right tasks.
The more analysis you do, the better your business can perform. But you can’t produce any meaningful analysis if you don’t have accurate information.
What Percentage Should Labor Cost on a Construction Project?
Every construction project is different. As a rule of thumb, you can expect your direct labor costs to be 20% to 40% of the project. If your labor costs exceed 50% of a project, there may be issues with how you are allocating your workforce.
How Do You Calculate Labor Cost Per Hour?
Your labor cost per hour is the total cost of your labor divided by the number of hours worked. To calculate your total labor costs, you need to add up all your employee wages and benefits and any payroll taxes or insurance — your labor and your labor burden.
How To Estimate Construction Labor Costs With Workyard
Estimate your construction labor costs quickly (and easily) with Workyard. In Workyard, employee hours are accurately tracked per project. You can pull real-time reports at any time — so you know exactly how much you have spent and can estimate how much you will spend.
In Workyard, you can:
- See where your employees are and what they’re working on
- Pull detailed reports regarding your labor cost data
- Easily import your reports into QuickBooks for payroll
Create a free trial account with Workyard today, or call 650-332-8623, to learn more about how to estimate your construction labor costs.