Who has the higher labor burden rate — one of your higher- or lower-paid employees? Would it be smarter to hire a new employee or to pay overtime to an existing employee? The answers may surprise you, says Diane Gilson, CPA and president of Info Plus Accounting. (In many cases, it's the lower-paid employee, and often, paying overtime is less costly.) Gilson, whose Ann Arbor-based company offers a full spectrum of QuickBooks support to clients nationwide, has developed a series of useful Excel spreadsheets, the most popular being one that calculates labor burden. “Most remodelers don't have whole teams of accountants to track their numbers, so they may not be aware of what individual employees really cost,” Gilson says.
The labor burden calculator is an Excel file consisting of a series of worksheets that include instructions, a reference sheet to document and compute shared costs, and individual worksheets for up to 40 employees. While everyone is aware of health insurance costs and payroll taxes, there are numerous additional costs to include such as workers' compensation, vacations, holidays, training, bonuses, and equipment and vehicle use. The worksheet is designed to determine available work hours, and your real cost per production hour — regular, overtime, and blended rates — for each employee. Results can be easily integrated with QuickBooks to see true job costs.
“[Final figures will] typically run at least 50% to 70% more than an employee's hourly rate,” Gilson says. “For remodelers, those numbers are a critical part of their profit because they're doing such unique work. Many of our clients also share this information with their employees to help them understand their true cost to the company.”
The calculator also computes what you need to charge per hour for each employee to make your profit goal; and a separate worksheet calculates the cost of “lost time” from things such as errors, re-work, time wasting, and labor mismanagement.
The software costs $199.95 to download from http://store.infoplusacct.com, or Info Plus will burn and mail a CD for an additional $15. You can insert different workers' comp rates and tax rates specific to your state. But you will have to keep an eye on any changes — updates are not yet wired into the software.