5 Ways to Accurately Estimate Construction Labor Costs

January 22, 2024

Contractors and subcontractors often have to face challenges in the fluctuation in Construction Labor Costs. Requires them to adapt new methods and strategies to solve challenges because each project is unique. After COVID-19 there is a rise in the labor cost because of the inflation era. Covering the labor cost accurately for contractors is very important because it covers a significant amount from 30% to 50% of the total project cost. So that’s a very huge percentage! Not only in the construction industry, it is the same for every other business that labor cost management should be bang on.

The understanding of the cost in construction is a metric that reflects how effectively a contractor can make labor input into profit. So, a keen eye on this thing shows competency in the overall project execution. Also, it enhances the image of the contractor among the leaders and investors. That is why Cost Estimating of the labors must be highly accurate. The professionals who provide estimating services break down tasks, timelines and dependencies. They check the past data and give effective insights into labor hours. Which helps them to be super accurate! 

It is true that after efficient technologies and machines, labor needs are less than before. But keep that in mind that a construction project can never be functional unless there is labor working on it. Does not matter how many advanced tools and machines are working. You will always require labor! If you are starting your construction project and confused about the Construction Labor Costs. You must outsource the best one from various Estimating Companies! Who has highly qualified estimators and engineers to help you out. Estimators have every detail on the labor rates according to the working hours because they have past experiences that helps them. They also use advanced software’s and tools to make their work easier.

READY TO BID SMARTER AND BOOST YOUR CHANCES OF WINNING CONSTRUCTION PROJECTS? LEARN THE LATEST TRICKS OF THE TRADE TO SAVE TIME, BID MORE COMPETITIVELY, AND INCREASE YOUR PROJECT SUCCESS RATE! REVOLUTIONIZE YOUR ESTIMATING GAME!

 What is Labor Cost?

Construction Labor Costs is basically the financial remuneration given to the workers that work in the construction process. This includes multiple types of roles like from carpenters to project managers and administrative staff. Everyone has their own particular salaries according to their position. So on what factors does the cost depend on? The total Construction Labor Costs depends on project location, its nature, and the expertise required from the workforce. When performing estimating methods, these factors must be considered to evaluate accurate results. There are multiple types of cost like direct cost in which involves wages and the benefits given to workers like carpenters, electricians, and plumbers. 

If we discuss the indirect cost, it involves those expenses for the workers who support the construction project. But they not directly involved in the whole production process. These people are like project managers, administrative personnel, and safety inspectors. You can say that indirect costs are a bit more difficult to track than direct ones because they span across different apartments. It is necessary for all the service providers to cover both direct and indirect costs. 

Then there comes the overtime cost in which labourers are paid for working beyond their regular hours. So in the construction industry accurate Construction Labor Costs estimating for all these expenses are considered to be substantial. Especially if the project has to finish early. When there is a delay in the construction then paying overtime to the labourers is also necessary. That is why understanding the labor costs in the initial phases and having accurate cost estimates is important.

5 ways to Accurately Estimate

Task Segmentation

The first and foremost thing is the task segmentation for estimating the time and effort required for each task. You must break down the entire project tasks into individual tasks. Like a building needs installation of HVAC systems and repairing of roof. By analyzing these both tasks separately gain a clear understanding of different labor hours. Helping estimating service providers experts to carry out tasks effectively.

This helps to have accurate estimation also you can use such methods in bidding to have accurate labor cost. Then you must estimate the time required for the job. This step involves some factors to consider like the complexity of the job, how much a worker is skilled or are there any delays? So make sure you are setting a time frame for each task.

Rule of Two Method

The rule of two methods in construction is simple to adopt for estimating Construction Labor Costs. This all depends on your past experience and start by multiplying known labor cost by two and then adding extra 10%. This is recommended when you do not have accurate labor cost figures. The construction labor database can be used to have average labor cost. Then the average is used for calculating the total cost. You can make adjustments according to the project’s requirements.

Square Foot Method

The square foot method is a common method used by various companies for various purposes such as prospecting, last-minute bidding, and preparing budget assessments. It helps to provide budget pricing in the early design stages. 

The main advantage of using this method is that contractors quickly submit bids to their clients because all information is generated by the historical data. To leverage this method effectively, contractors need to collect and analyze data on the average cost per square foot for each type of project. 

Unit Pricing Method

The unit pricing method is a very good approach to calculate Construction Labor Costs. In this method, multiplying the hourly rate by the time needed to complete a task is performed. If the hourly rate is $30 per worker and the labor takes 10 hours to complete, the total labor cost will be $300. If you do not have the info on unit pricing, cost databases can be used to collect valuable data. Because the database is regularly updated according to the recent data. If you want more refined cost then divide the total labor cost by the square footage to have cost per square foot. This way estimating of labor expenses can be conducted.

Historical Data Analysis

By examining the past projects with the same scopes of the current project can give you accurate Construction Labor Costs. In this approach the review of detailed records of past projects is really important. It can be like task duration, workforce composition, and any unexpected challenges faced. This way contractors can see carefully what factors can affect. 

These all factors help to analyze the labor cost to identify patterns and trends. In addition to that, it is recommended for contractors to regularly update historical data. This helps them to generate accurate labor cost and in making best possible decisions.

THERE YOU HAVE IT! FIVE GAME-CHANGING STRATEGIES TO SUPERCHARGE YOUR CONSTRUCTION LABOR COST ESTIMATES. NOW, IT’S YOUR TURN TO PUT THESE INSIGHTS INTO ACTION. DON’T MISS OUT ON POTENTIAL PROJECT WINS! START IMPLEMENTING THESE TECHNIQUES TODAY AND WATCH YOUR BIDDING SUCCESS!

Conclusion

So, in short there are many contractors that encounter difficulties of losing bids due to imprecise Construction Labor Costs. That results in the end in time delays and over budgeting. Because they usually perform such conventional methods that are time-consuming and not accurate. So, they need to adopt new approaches to ease the whole estimating process and make the project successful. 

As labor costs cover a big portion of the whole budget. That is why their accurate estimation is important. To familiarize with effective methods, estimating service providers must follow the above discussed 5 ways to estimate accurately. This will save you plenty of time and give you more precise estimates.