You know what Mike, our article example employee, costs in wages - $68/hour based on his qualification code. Yes I know this was an exaggerated payroll. The market needs to show up and regulate.
Fine. Ill move forward with a more realistic option. Mike got promoted to chain saw polisher and is making $75 an hour. but we got Josh here ready to fill his place. Josh is a ground crew equiopment operator with 5 years experience, has a Class A CDL and his OSHA 30. Employee Code: EQO4+D3+OSH+E2 with a pay rate of $45 per hour. He costs significantly less but is still properly qualified and compensated for the value he provides to a crew. So Josh = EQO4+D3+OSH+E2 for $45. Is this what the company pays? Of course not! If you have ever struggled to make payroll, then you understand how important properly budgeting AND PRICING labor assets truly is. This is what that means. — check the math if you want. Adjust to your theft rates as needed. Payroll Taxes (Employer Portion):Social Security: 6.2% = $2.79/hourMedicare: 1.45% = $0.65/hourFederal Unemployment (FUTA): 0.6% = $0.27/hourState Unemployment (SUTA): ~2.5% = $1.13/hourSubtotal: $4.84/hour Workers Compensation Insurance: (“If it seems kinda like a racket…. it might be insurance, or government protecting and serving.”- Jeremiah Anderson.) Tree care industry rate: ~15-25% of wagesJosh's cost: $6.75-11.25/hourAverage: $9/hourBenefits & Insurance:Health insurance: $8-12/hourGeneral liability allocation: $2/hourVehicle insurance allocation: $1.50/hourSubtotal: $11.50-15.50/hour
THE MATH: Josh's True Hourly CostBase wage: $45.00 Payroll taxes: $4.84 Workers comp: $9.00 Benefits/insurance: $13.00TOTAL COST: $71.84/hourIf you're billing Josh at $75/hour thinking you're making $30/hour profit, you're actually making $3/hour. ON ONE FACTOR OF YOUR CREW. This is one of many likely holes in your boat we need to plug and repair before we can have solid ground.
Proper billing calculation:True cost: $72/hourMinimum markup: 25-35%Josh should bill at $90-97/hour minimumThis is why companies that don't understand employee burden go broke while thinking they're profitable.
The brutal truth: Your $45/hour employee costs $72/hour and needs to generate $95/hour in revenue to be profitable.
It is more likely that you are average with others reading this (and me writing this) than you are ahead of the pack. If you are ahead good. Use the excess time you have now to reinforce, retrain, and optimize for the future. Good enough was only good enough yesterday. TCi is going pro. Till next time
- •Jeremiah