Thursday, April 25, 2019
Job Cost Estimating, Construction Labor Burden, and Cost of Goods Sold
www.markupandprofit.com: The "burden" is the additional hourly cost of an employee. You might pay an employee $20 an hour, but they cost more than that. You'll also pay federal payroll taxes, unemployment and workers compensation insurance, and maybe more depending on your locale and the benefits you offer. The actual hourly cost of an employee is called the burdened labor rate, or labor burden.
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This article was revelatory for me. Before coming to Carnegie Mellon, I was reaching the point in my freelancing career where I needed to get pretty serious about estimating jobs. I was also starting to consider finding an assistant to help with certain gigs. For other gigs, I was thinking about switching to a day rate, and I had no idea how to actually evaluate any of the factors involved for any of this. The formulas presented here lay out a great deal of what I would need to consider if I were to establish an LLC and hire someone as an employee, but it will also help me give more accurate estimates to clients. Most importantly as a freelancer, it adds another tool to help me evaluate cost/benefit and decide whether or not I should take on a job. I lost a lot of money by taking on jobs that contracted me sooner than better paying, lower-impact jobs, and it would be a substantial move forward if I could evaluate gigs more objectively.
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