Michael Stone’s latest column for Markup & Profit Revisited focuses on figuring out employee labor rates when doing estimates. Stone says it depends on when you calculate your markup. The difference between using the wrong labor rate, or using someone else’s markup, can be up to thousands of dollars.
Stone goes on to say,
There isn't a right or wrong way to do this, it really doesn't matter. What matters is that you're consistent; whatever assumptions you make when calculating your markup need to be considered when estimating your job costs. The goal is to have all your payroll taxes and benefits accounted for when you quote the job, but only once. If you aren't consistent, you're doing it wrong.
It's dangerous to compare your markup to someone else's, because you don't know their assumptions. If they have a markup of 1.5 and estimate labor at $50/hour, and you use their markup while estimating labor at $15/hour, you're probably headed for trouble.
When I say that the markup for a typical remodeling company is usually at least 1.50, I'm assuming a fully-burdened labor rate. If you estimate jobs using the actual rate paid to employees, you'll probably need a higher markup. You need to calculate your numbers based on your situation.