Overhead

[Alwayslearningelec]

Does your overhead m/u change for each job you estimate? What are some of your overhead cots on a large job? Thanks

 

[cdslotz]

You talking about fixed overhead (which is applied the same on each bid), or direct job expenses (which is applied specific for that job).
Direct job expenses are NOT overhead.

 

[Sparky555]

Overhead is everything that is not associated with a specific project. Office salaries, office equipment, office building lease, phones, advertising, accounting, legal, etc. are examples of overhead.

 

[zog]

Typically overhead is factored into your labor (+burden) rate so should already be included.

 

[cdslotz]

Labor burden is not overhead

 

[zog]

Labor burden is not overhead

Yes, and no.

Not the cost of your building or assistant but labor burden should include the following:

?Payroll taxes. FICA, unemployment, Social Security ? all of these costs associated with paying your employees should be calculated as part of labor and billed above the line.
?Workers' compensation. "Even if your experience modification is below 100%, you should be billing as if it were above 100%,"
?Liability Insurance.To determine how much more you should charge for labor to account for liability insurance, divide the total amount you spend on liability insurance in a year (for instance, $20,000) by your total annual payroll (say, $350,000) to get the percentage of cost that should be added to your hourly labor rate. In this example, 5.71%. So, if one of your guys makes $25 per hour, you should add $1.43 (5.71%) to your hourly rate.
?Health Insurance. Use the same formula described above to determine how much additional must be charged to account for the employer?s cost of employee health insurance.
?Vacation, holiday, and sick time. Paid time off is a fantastic employee benefit, but the cost of literally paying your employees not to work must be accounted for in the hourly rate charged for jobs that they do work.
?401(k) and other pension plans.
?Small tools. You should account for lost, stolen, or abandoned tools in their labor costs, this ostensibly trivial cost adds up quickly, and will probably add 50 to 75 cents to your hourly labor rate.
?Variable overhead. In this category, you should include all costs that are directly related to employees but cannot be divided precisely between jobs. These costs may include vehicle costs, education, fuel, cell phones, and others.

 

[cdslotz]

Yes, and no.

Not the cost of your building or assistant but labor burden should include the following:

?Payroll taxes. FICA, unemployment, Social Security ? all of these costs associated with paying your employees should be calculated as part of labor and billed above the line.
?Workers' compensation. "Even if your experience modification is below 100%, you should be billing as if it were above 100%,"
?Liability Insurance.To determine how much more you should charge for labor to account for liability insurance, divide the total amount you spend on liability insurance in a year (for instance, $20,000) by your total annual payroll (say, $350,000) to get the percentage of cost that should be added to your hourly labor rate. In this example, 5.71%. So, if one of your guys makes $25 per hour, you should add $1.43 (5.71%) to your hourly rate.
?Health Insurance. Use the same formula described above to determine how much additional must be charged to account for the employer?s cost of employee health insurance.
?Vacation, holiday, and sick time. Paid time off is a fantastic employee benefit, but the cost of literally paying your employees not to work must be accounted for in the hourly rate charged for jobs that they do work.
?401(k) and other pension plans.
?Small tools. You should account for lost, stolen, or abandoned tools in their labor costs, this ostensibly trivial cost adds up quickly, and will probably add 50 to 75 cents to your hourly labor rate.
?Variable overhead. In this category, you should include all costs that are directly related to employees but cannot be divided precisely between jobs. These costs may include vehicle costs, education, fuel, cell phones, and others.

Yes that is correct, with the exception of the last two. I've worked for companies that deal with those differently. The burden is "overhead" as it relates to labor. I didn't add all of yours up, but ours ran 35% last 15 years.
Then you apply your overhead for the entire job (before profit) which is calculated over a year's time based on projected sales and projected non-job related costs. Ours ran about 12.5% last year.

So the OP wanted to know if overhead is different for each job. I say no. But it could be different next year.

 

[Alwayslearningelec]

Yes that is correct, with the exception of the last two. I've worked for companies that deal with those differently. The burden is "overhead" as it relates to labor. I didn't add all of yours up, but ours ran 35% last 15 years.
Then you apply your overhead for the entire job (before profit) which is calculated over a year's time based on projected sales and projected non-job related costs. Ours ran about 12.5% last year.

So the OP wanted to know if overhead is different for each job. I say no. But it could be different next year.

Thanks CD

 

[Strathead]

Yes that is correct, with the exception of the last two. I've worked for companies that deal with those differently. The burden is "overhead" as it relates to labor. I didn't add all of yours up, but ours ran 35% last 15 years.
Then you apply your overhead for the entire job (before profit) which is calculated over a year's time based on projected sales and projected non-job related costs. Ours ran about 12.5% last year.

So the OP wanted to know if overhead is different for each job. I say no. But it could be different next year.

I 100% agree with regards to labor burden. That is actually a FIXED cost, per hour that an employee costs you. I'd like to note that when an emplyee works overtime, then the burden generally changes to a different percentage, but most of us let it ride, unless you were say estimating a job that had a lot of overtime and you wanted to get close.

Regarding, overhead though, things get a little fuzzy. The easy way out is to calculate all costs for a year, divide by the total sales and determine a percentage based on that year and apply to the next. To declare that actual overhead cost is simplistic. On a big job I may put in cost for an office trailer and storage as direct job costs, where on a small job I may figure that the stuff will get delivered to the shop and brought to the job. That creates additional (overhead) cost on the small job in comparison. Not that I do more that play with my percentages to make a profit, but it is something to think about as a bidder.