Labor Cost in Construction: Is it Time to Rethink the Way we Calculate and Track it?

Dealing with Unpredictability 

In the construction industry, labor costs can be like trying to guess the weather. Traditionally, companies rely on a blanket rate for labor calculation, predetermined based on historical averages. But what happens when the unexpected strikes, like change orders demanding a premium rate?

How do you calculate labor costs?

The cost of labor per employee is their hourly rate, multiplied by the number of hours they'll work in a year. The challenge is not with the formula, but with who’s keeping order of the actual hours worked, and reported. This strangles your ability to see how a project is actually performing.

The Real Deal with Labor Tracking 

Time tracking in construction often misses the mark. It’s not uncommon for the actual labor hours to drift away from those neatly estimated values. This discrepancy can turn into a budgeting nightmare, leaving project managers scratching their heads wondering where the hours went.

Things to Look Out For:

• Unexpected Overtime:
  • Frequent unplanned overtime can be a major red flag that signals poor job tracking. It's essential to understand whether these extra hours are due to unrealistic initial estimates or if your team is encountering unforeseen issues on-site. Having a tool to help monitor these trends can help adjust future estimates and planning.
• Inconsistent Reports:
  • Keep a vigilant eye on discrepancies between reported hours and job progress. Inconsistencies may indicate issues with how hours are being logged or suggest that workers are not aligning their efforts with the project timeline. Regular audits of time logs against deliverables can help pinpoint where the misalignments are occurring.
• Budget Overruns:
  • Regularly exceeding the budget may suggest that your labor calculations need refining. If your project consistently spends more on labor than planned, it might be time to revisit how you estimate labor needs at the outset of your projects. Consider whether your estimates are accounting for all variables, including weather delays, supply chain issues, or other external factors.

What Can You Try Yourself? 

A simple mobile app or software tool that enables workers to log their hours in real time directly from the field can be a great starting place. This direct reporting helps minimize discrepancies and allows for a more accurate reflection of actual labor costs (not to mention if they're tracking their travel too). Revalate offers a custom trial tracking tool to help get you organized and updating labor costs quickly and accurately. 

Time’s Ticking 

Embracing more sophisticated labor calculation and tracking methods isn't just about keeping up with technology; it's about staying ahead in a competitive market. With the right tools, construction managers can ensure that every hour and every penny counts.

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