Electrical Axuz

Australian Industry Trade Register
& Contractors Technical Toolbox

Electrical Estimating

The cost to the business to provide labour or complete a contract is the most important figure to ensure the business activities are generating a profit. The only way to be certain is to perform a full costing for every job. I was astounded to find many contractors in the industry never work out the cost of completing quoted work.

The cost to provide labour must be recalculated whenever wages, motor vehicle expenses, overheads and taxes change. An increase in costs does not automatically justify a higher sale price but knowing what the real costs are is the only way to provide quotes and be certain that the work will return a profit.

The electrical industry is far to competitive considering the dangers involved because we underestimate the costs involved. The best way to calculate the cost of labour is to tally of of the operating and labour costs for a year and then divide by the number of hours charged to customers. This does not tell us the current cost to provide a tradesman but increases can be calculated on a per hour basis and added.

It is easy to calculate the labour component on its own using the correct figures. Workers are entitled to 10 sickies, 20 days holiday and 10 public holidays each year from the 360 workdays available (44 weeks). To calculate the cost multiply the weekly wage by 52 weeks then add leave loadings, superannuation, long service leave, workcover and any other associated costs. Divide the total annual cost by 1672 (44 weeks x 38 hours) to calculate cost per hour.

The cost per hour does not take into account the workers performance and work place efficiency. The employee may be at work for 1672 hours during a year but not every hour is productive so this figure is adjusted according to the workplace and employees efficiency. If an employee averages 32 chargable hours a week redo the calculation above on this basis. Total Cost divided by (44 weeks x 32 hours) to obtain the total cost.