The majority of construction companies in America have all but the necessary few employees costed to projects. Executive, Estimating, Safety, Accounting, General Administrative, Human Resources, and Business Development are typically the roles that may be overhead or only partially job costed to multiple projects through General Conditions.
Too often we get candidates that say they do not want to work for a smaller company because they think they can’t afford competitive salaries to the bigger companies. This is false thinking. Profitability of a contractor is based on receivables less expenditures. A construction company usually uses the rule of thumb of 5% gross revenue cap before paying bonus. A company of any size can experience cash flow problems which often lead to layoffs as employee wages is usually the most significant cost to a company. Costs are broken down to direct labor, overhead and general expenses. Many smaller companies run on much higher margins than the larger companies and can offer higher wages to key management employees who help them maintain those margins, control spending costs and grow the company.
Employers focused on sustainable growth and who can offer you stability versus a one and done project situation, know how to manage their employee costs. Employee costs include, but are not limited to: payroll, taxes, paid time off, benefits, workspace, equipment, office supplies, training, support staff such as administrative or human resources, company apparel, safety equipment, cellphone, outings or events, etc. Most employees cost an employer 25-40% above whatever their standard wage amount is. You can calculate your wage amount with the with the wage calculator we provided in last week’s blog article.
Why should this matter to you?
If you are an employer or a manager working for an employer with authority to adjust compensation this should matter to you to understand the responsibility behind giving someone a raise or not. If you are an employee seeking a raise recognizing that timing and the amount of the increase may be the difference between job security for you and other employees.
To learn more about how to calculate the 5% gross revenue cap in construction refer to the article by HBK.