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I just spent my labour budget and I am only part way through the job.....
The ability to capture actual labour worked on a job is a basic requirement of any job costing system. Actual labour worked must get costed to the job in order for accurate job analysis, there is no point in allocating an estimated cost for labour as there are so many variables from day to day and between sites.
Regardless of whether you employee the majority of your labour force or use majority of labour subcontractors you need to be able to effectively manage the labour spend on a job. “Labour spend” covers both labour hours and labour cost. In recent times we have seen a large swing in labour rates; the hours might be the same but the fluctuation of rates can severely impact a job.
So what happens when you are diligently recording timesheets to a job and you suddenly realise the labour budget for the job has been spent and you are only part way through? Was it due to an over-run in hours or rates?
When calculating the original budget you generally have an idea on how many hours it will take each task and apply a rate for the works. Same goes when there is a variation which involves labour; you will know the hours required and the rate. So why not use this information to help you analyse your costs and identify potential budget sooner?
By recording the labour units and cost you will be able to ascertain if the budget blow out it due to under estimated hours, or a labour rate fluctuation.
When loading the jobs cost budget into your software always ensure you record the labour units and rate (the cost will prefill) for each cost code / task.
Whenever you record a variation for more hours ensure you break the labour component down to units and rate. There is no point in only recording the variation cost as this will reduce your ability to ascertain if the blow out is due to underestimated hours. However if you record a variation to counter a rate fluctuation do not record the hours as the variation is only for a rate correction.
During reporting you will need to review the labour units and cost to date compared to the budget balance. Is there sufficient labour budget to complete the job, or should you request a variation now?
As an overview our solutions can help with:
- Capture labour budget – record hours and rate for each cost code / task for labour
- Capture labour variations – record the hours and rate for each variation (broken down to cost code / task)
- Capture labour – record actual labour on the job from timesheets
- Labour analysis – review possible labour blow out identified to under-estimated hours or rate fluctuation
- Workflow – options to implement workflow to trigger alerts when labour budget is running out.