Benefits such as uniforms, vehicle and gas allowances, and tools require a bit more work, because these costs might not be easy to determine accurately. For example, says Shawn McCadden, a remodeling consultant, educator, and REMODELING columnist, if you have a truck that’s assigned to one employee only, the calculation is straightforward. But if two or more employees use the truck, you have to make sure you assign the appropriate percentage of the total annual maintenance cost to each of those employees.
Employee education will also need to be assessed to determine how to assign costs to an individual employee. Paul and Nina Winans give their employees a $200 education allowance each year. From year to year, additional costs have to be factored in as well. Last year, a Sandler sales trainer ran five training sessions with Winans’ sales team.
“I took the charges for those five sessions and divided that by the number of people attending, then applied that number to each employee,” Nina says.
WORK AND NON-WORK The next set of calculations determines how much each employee-related expense costs the company per hour. Before taking this step, it’s essential to understand the difference between productive and nonproductive hours. Although there are 2,080 hours each year (40 hours per week multiplied by 52 weeks), none of your employees actually works all of those hours.
“There are 2,080 hours in the year,” says Paul Winans, “but we back off things like the vacation days, holidays, the time they’re not producing.”
Nonproductive time — time in which employees are getting paid but not producing revenue for the company — can include any paid time off (vacation, holidays, sick or personal days), meetings, time spent on training and education, and miscellaneous lost time.
Bob Tilghman, the Pennsylvania remodeler, doesn’t include meetings in his total compensation sheet, but deducts an estimated number of hours lost to inevitable lapses in productivity.
“It’s human nature,” Tilghman says. “People have conversations, the coffee break runs over, there’s time wrapping up cords at the end of the day. For the lead carpenters, we double that because they spend a lot of time meeting with subs to go over their work and meeting with homeowners.”
Whatever it amounts to, nonproductive time is essential to understanding the true cost of labor.
“The difference between their productive hours and what you pay them for the whole year is important,” McCadden says. “The cost you’re assuming per productive hour has to be inflated to account for those non-productive hours. During the hours when they’re being productive for the company, you still have to bring in enough to be able to pay them for the hours where they’re not being productive for the company.