How Do You Calculate Labor Rate? | For Construction Contractors

Labor rates can be pretty confusing at times. Basically, labor rates are the true cost of your employee--which means more than just the wages or salaries. Things like insurance, taxes, vacation, etc. all go into calculating the labor rate. It gets pretty complex.

Luckily, we break it all down in this video, so let's get started!

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Atlas CFO does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

In connection with estimates, forecasts, plans and financial projections prepared by Atlas CFO and its Subsidiaries. The user acknowledges that there are uncertainties inherent in attempting to make such estimates, forecasts, plans and projections, that the user is familiar with such uncertainties, that the user is taking full responsibility for making their own evaluation of the adequacy and accuracy of all estimates, forecasts, plans and projections so furnished (including the reasonableness of the assumptions underlying such estimates, forecasts, plans and projections), and that the user shall have no claim against Atlas CFO or its Subsidiaries with respect thereto. Accordingly, Atlas CFO and its Subsidiaries make no representation or warranty with respect to such estimates, forecasts, plans and projections (including any such underlying assumptions).

[Oldbutnotout]

Why you don't have a Million subs is a travesty. I have been a co-owner of a commercial construction company for 30+ years - but - I have done almost zero accounting. Now I am thrown into the deep end of the pool and trying to do butterfly while skipping freestyle (swim family :) I needed someone to help me with easy to understand terminology before I get into the complicated rollercoaster of Union commercial construction accounting. Your explanation of construction accounting is exactly what I needed. Thank you so much for sharing your knowledge.

[bsparkle]

Do you have a video of Journal Entries for Over/Under Billings and how to connect them with the Balance Sheet and P&L statements? I have seen Over Billings accounts, Under Billings Accounts and also Under/Over Billings. I am an Accountant, but Construction Accounting is new to me.

[AceCPAsBookkeeping]

TLDR: Understanding and calculating labor costs involves considering various factors such as wages, burdened up rates, payroll taxes, employee benefits, insurance options, and additional costs, and it can be customized based on the type of employee and the needs of the shop.

00:00 🔨 Understanding labor costs involves calculating the true cost of labor, including wages and burdened up rates, and can be calculated as a pool rate or per person.
01:55 💰 Calculate labor rate by considering payroll taxes, employee benefits, insurance options, and additional costs based on the type of employee.
03:03 🔨 Your labor rate is customizable, including tools, consumables, safety, and a wildcard for additional costs, but start small and adjust as needed.
04:34 🔨 Labor rate can be calculated in either labor dollars or labor hours, and it's up to you to choose which one works best for your shop, with the flexibility to modify the system to fit your needs.
05:54 🔧 Labor rate can be calculated using either labor hours or labor dollars as the denominator, and it's okay if different contractors have slightly different methods.
06:59 🔨 Calculate labor rate by starting with a simple example and keeping it simple.
07:17 💰 Calculate labor rate by adding wages, taxes, vacation, health insurance, and dividing by hours to get the true cost of the employee.
08:29 🔨 Use templates from the website for job costing and labor rate calculation, with over 100 videos and templates available for assistance.