Prime Cost Of Labour % Addition
I thought you might be interested in the Prime cost of labour article, it discus’s what should be included in your % uplift, it’s something we are often asked about the %’s.
The excel sheet calculates the prime cost of labour and then allows you to adjust for hours, distance and blend of labour. The rates are from the JIB book, see reference.
The prime cost of labour as defined by the RICS/ECA should take into account a number of factors.
25 miles shop to site
Prime cost of labour £25.66 Cost £27.12 (inc travel 37.5 hrs)
Prime cost of labour £25.66 Cost £36.13 (inc travel/lodge and o/t 50 hrs )
So % uplift for contractor B to get breakeven on cost is (£36.13-£25.66/£25.66) = 0.40 or 40% uplift
Lets say Contractor B needs 30% on labour to cover 6.1 (see attached)
£36.13+30% = £46.97
Therefore contractor B needs (46.67-25.66/25.66) = 0.81 or 81%
So you would state 81% in this example uplift to the prime cost of daywork for labour.
So % uplift for contractor A to get breakeven on cost is (£27.12-£25.66/£25.66) = 0.056 or 5.6% uplift
Lets say Contractor A needs 30% on labour to cover 6.1 (see attached)
£27.12+30% = £35.26
Therefore contractor A needs (35.26-25.66/25.66) = 0.37 or 37%
So you would state 37% in this example uplift to the prime cost of daywork for labour
What else does the uplift take account of?
In this example contract A cost is £27.12 and charge £35.26 = £8.14 per hour and that has to cover 6.1 (a) to (t)
Where as contract B cost is £36.13 and charge £46.97 = £10.84 per hour and that has to cover 6.1 (a) to (t)
Now lets take a closer look at (a) to (t) that your % addition to the prime cost of labour should include as stated in the PDF extract;
- Head office charges
- Site staff inc site supervision??? This could be heavy cost if there two operatives and you have to have a supervisor solely for them
- Additional cost of overtime, yes we have covered this
- Time lost due to inclement weather? Not often applies to electrical trade, more for brickies being rained off etc
- Bonus payments, applicable if you pay this, the cost should be reflected in the % uplift
- Apprentice study time,
- Lodge/subsistence, yes this is covered in the calc sheet
- Fares, ditto
- Sick pay, no this isn’t covered in the calc, small allowance for this might be appropriate
- Employers liability insurance, should be part of your 30%, but you may look at this as a cost per head and apportion it
- Redundancy payments
- NI payments, this is covered in the sheet
- Tool allowances , not usually added, but if you are supplying tools such as drills not picked up as a plant charge
- Use of maintenance and none mech hand tools
- Use of erected scaffold staging tressel or the like , ie steps
- Protective clothing, masks?, artificial lighting, could be costly, welfare facilities, storage that maybe available on site, so if you have to store 500 widgets to be installed under dayworks your % should cover this cost.
- Variation to basic rates, ie D2 site
- Catch all, any other obligations
- Any welfare /pension payment, this is covered in the sheet prime cost now.
- They have saved the best till last ……… Main contractor profit.
As a general rule we state in the model tender letter as below, but where the project is some distance you may want to be at a higher % on labour.
Most main contractors are kind enough! to pre-state what your % uplifts are typically 50%, so always include your % daywork rates in your tender letters.
- Dayworks uplifts are; labour +XX%, materials +XX% and plant +XX%. Labour would be based upon the prime cost of labour as defined by the RICS/ECA/HVCA. Materials would be trade price plus delivery and plant would be minimum hire charge as published in the HSS price list for the period on site, not time used.
Daywork rates are something that we get asked about a lot the basics are simple but to be for warned is for-armed.