In the United States, there are 2,080 standard working hours in a year. For a variety of reasons, however, few remodeling company employees are consistently productive eight hours a day, five days a week. On top of that, many remodelers offer benefits like paid holidays and vacation that further reduce hours worked. These "non-productive hours" -- essentially, the difference between hours billed and hours paid -- can add up to thousands of dollars each year. If you're not accounting for them, the money comes out of profit.
Non-productive hours are most critical for task-related estimating. There are dozens of places in your labor estimates where non-productive hours crop up, usually without your being aware of it. Until these hours are included in productivity estimates, you're paying your field crews for time you aren't billing for.
This benchmark assumes that each item in the "Non-Productive Hours Checklist" [bottom of page] generates 15 minutes of unproductive time each day for which you are paying but not billing. (The exception is lumber runs, which are figured at 2 hours per week.) That adds up to just under 400 hours per year per employee, or nearly 20% of hourly payroll. And by the way, that includes hourly office employees, who have their own checklist of distractions that reduce their productivity.
In addition to adjusting productivity rates in your estimates, you should include a subset of non-productive hours in your billable wage rate that covers paid time off. A bare bones benefit package of two weeks vacation, six holidays, and five sick days generates 168 non-productive hours. To cover the expense of paying for but not billing for these hours, you need to add about 8% to your wage rate, more if your benefit package is more generous. If you don't, the shortfall, when applied to total hourly payroll, quickly adds up to a sizeable amount of cash. And because labor charges are subject to markup like any other direct costs, you also stand to lose the margin on that uncollected labor overhead.
Non-Productive Hours Checklist
If you're not accounting for non-productive tasks in your estimates, you're losing money. Remember also that some of these non-productive hours are generated by office staff.
Start-up and shut down. These daily routines include coiling and uncoiling power cords and air hoses, unpacking and storing tools, uncovering materials, and planning the day's work.
Staging erection and breakdown. This can be something as simple as the time required to move and brace ladders to more complex rigging of pipe-staging or pump jacks to reach work on the second or third story.
Material handling. Field crew spend time moving delivered materials to storage areas, more so on sites with difficult access. Materials are handled once again the day they are installed or when they need to be moved out of the way of other work. Time is also spent checking orders for completeness and damage.
Lumber runs. Incomplete or damaged orders typically lead to a supply run. Even when these trips are planned for the beginning or end of the working day, employees often record travel hours on their time cards that was not included in the estimate.
Head-scratching. Hidden conditions always take more time to handle than we think, and we rarely capture all the labor costs in a change order. Field crew will also spend time cross-referencing details and double-checking dimensions on the prints.
Site supervision. Most remodelers underestimate the amount of time their production people spend supervising -- or just helping out -- trade contractors. Even 15 minutes each day adds up over the course of a year.