The Renovation Budget: Hourly Labor Rates
Posted on September 26, 2007 - Filed Under Business |
Always acknowledge a fault. This will throw those in authority off their guard and give you an opportunity to commit more. - Mark Twain
It was agreed upon an hourly rate would be charged for the project. I’m weird when it comes to people’s income; the exact rate will not be disclosed. A clue: it was definitely higher than minimum wage.
When discussing the blown budget, my mentor asked me one simple question: You’re paying a flat hourly rate no matter what the job?
That’s when my stomach sank.
In review of the listing of work to be done, most was pushed off onto the hired help. My interest was giving as much work as possible to help support an independent entrepreneur.
The hourly rate charged was equivalent to that of an electrician. The same rate was applied for two people which easily pushed the hourly rate above $100/hour.
The missed realization: no matter what the job the pay rate was the same. In essence, by paying the same rate I was saying that a dry-wall person makes as much money per hour as an electrician. That is simply not the case. Installing tile costs as much as installing electrical? Not a chance.
Even if I had known exactly how many hours it took the first crew to install drywall, the numbers would have been skewed. The labor rate for that specific task was too high.
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3 Responses to “The Renovation Budget: Hourly Labor Rates”
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I honestly think that paying by the hour is just asking for a blown budget! As you know, the unforseen comes up OFTEN. And, it’s nice if the laborers can share in that risk with you. What I’m saying is, when some glitch comes up, you’re not the only one eating it. I understand that major glitches call for a renegotiation of a bid sometimes. But, little glitches and contractor mistakes should not have to cost you extra. Any contractor should account somewhat for the unexpected in their bid.
Just my two cents! I don’t want to see you get burned like I did trying to pay hourly.
Contractors LOVE to get paid hourly because they are guaranteed to bank if the unforseen occurs.
Trisha, I agree whole-heartedly.
Your two cents should be inscribed on the highest mountain tops.
Unfortunately it’s something I saw too late.
I always pay by the job, NEVER by the hour. I hire people that understand what they do and can therefore prepare accurate bids. I make sure we agree on the scope of the work, and get estimates of the cost for known potential issues in the project. When something that exceeds the scope of the job is found, I get a price before I authorize the additional work.
If you do this often enough, you will develop a list of people that you call when you take on a new project. Since you manage your own properties, you call them for repairs as well, thereby “keeping in touch.”