VIEW AND DOWNLOAD THE FULL WHITE PAPER (WITH FIGURES) HERE.
What is Retail Labor?
Xactimate line items comprise four separate components, all of which contribute to published unit prices. These four components include:
- Materials
- Equipment
- Retail Labor
- Market Conditions
Line items with labor components reflect a cost within the Retail Labor field. The Retail Labor field is further broken out into three separate sub-components:
- Labor Worker’s Wage
- Labor Burden
- Labor Overhead
Definitions by Sub-Component
Labor Worker’s Wage – The portion of the Retail Labor intended for the actual worker(s) per unit.
Labor Burden – The portion of the Retail Labor intended to cover the costs associated with employment burdens. These costs include FICA, General Liability, Pollution Liability, State Unemployment, Federal Unemployment, etc.
Labor Overhead – Per Xactware’s White Paper “Overhead and Profit”, this field includes costs associated with overhead expenses that may consist of vehicle costs, uniforms, mobile phones, depreciation of hand tools owned by the company, etc. This field also includes General and Administrative expenses and profit correlating to employees performing billable tasks. These expenses are commonly referred to as Sub-Contractor Overhead and Profit.
Retail Labor vs. Retail Labor Rate
Retail Labor Rates within Xactimate are fully-burdened rates in an hourly format. These median hourly rates are utilized within all line items with labor components and are specific to the trade selected. The Retail Labor Rate is divided by the yield, which then calculates the total labor cost to perform a specific task. This cost then populates the Retail Labor field. Retail Labor Rates are in a fully-burdened hourly format, whereas Retail Labor reflects the labor cost required to complete a selected task. Retail Labor is also referred to as the labor ‘cost per unit’.
Labor Burden
Xactware’s published pricing includes costs associated with Labor Burden, which are trade-specific. Labor Burdens are the costs associated with employment. These costs include Federal Insurance Contributions Act (FICA), General Liability, Pollution Liability, State Unemployment, and Federal Unemployment. These burdens also include Fringe Benefits and Worker’s Compensation. Labor Burden rates for a Roofing Laborer (RFG) far exceed that of a Demolition Laborer (DMO).
Job-Personnel Overhead (Sub-Contractor O&P)
Job-Personnel Overhead costs are directly associated with the labor selection that a user inputs. Per Xactware’s published White Paper “Overhead and Profit”, Xactware states the following:
“Job Personnel Overhead expenses are included in the Labor Overhead portion of each unit price in the Xactware price list. The labor Overhead, along with expenses for Labor Burden and Worker Wage (wage paid to the individual) make up the Retail Labor Rate.”
Comparing the Job-Personnel Overhead expenses of Demolition Labor (‘DMO’), and Roofing Labor (‘RFG’), a user can identify that the overhead costs associated with a roofing trade exceed those of a demolition trade. These overhead expenses include “vehicle costs, uniforms, mobile phones, depreciation on company-owned hand-tools, etc. Job-Personnel Overhead also includes the portion of General and Administrative expenses and profit that correlate to employees performing billable tasks and that is not included in the General Contractor O&P markup.” The White Paper continues, stating the following:
“…these expenses are incurred by either a general contractor using employees, or by a sub-contractor, depending on who is actually performing the work.”
It is clear that Job-Personnel Overhead expenses are trade-specific.
What Is The Median Market Actually Charging?
Xactware makes it well-known that published costs within their price lists require verification by the estimator, who is ultimately responsible for the accuracy of the estimation process. When the pricing of any one line item is found to be an inaccurate representation of local market costs, an estimator should correct accordingly.
Using a removal item (-) of 30-year laminated shingles (RFG300), we can provide a comparison between Xactware price data and actual market data.
On a CODE8X_SEP16 price list (Colorado, Denver; Xactimate 28/X1; September 2016), the difference between a ‘DMO’ selection ($51.30/SQ) and an ‘RFG’ selection ($120.40/SQ) is an increase of +$69.10/SQ. But is the default ‘DMO’ figure of $51.30/SQ accurate, or is the ‘RFG’ figure of $120.40 warranted? What is the median market actually charging?
Market Data
An estimator should always ensure costs within published price lists are consistent with their local market. Choosing an objective source with a vast exposure to the market is important.
For comparison, Angieslist.com was utilized based on its national exposure to the roofing industry and its competitive and objective nature. Angieslist.com reports that “a one-story roof with a single shingle layer costs between $100 and $150 per square to remove.” Based on this range, the median market would reasonably charge approximately $125.00/SQ for removal. Based on this data, the ‘RFG’ Retail Labor Rate selection meets median market pricing- representing a cost of $120.40/SQ. A ‘DMO’ Retail Labor Rate is substantially lower than what the market charges- 41% lower, based on an average of $125.00/SQ.
Other options may include surveying price schedules listed by other roofing contractors in the local economic region.
Does Tear-Off Require Less Skill?
Those who have been involved in the reconstruction of a roof generally know that roofing contractors regularly utilize one crew to complete removal and replacement. Workers within any one crew have a wide range of skill levels and hourly pay. For removal, there may be a roofing laborer tearing off concrete roof tiles. Still, there also may be a roofing laborer carefully removing the flashing from a dormer in order to avoid damaging a stucco veneer. For replacement, there may be a roofing laborer hand-carrying concrete roof tiles and stacking them as needed, where other roofing laborers will be installing.
If one were to average out all hourly rates associated with each roofing laborer and then add Burden and Job-Personnel Related Overhead, he or she would determine an average fully-burdened hourly rate for the entire crew, as represented within an ‘RFG’ Retail Labor Rate. Regardless of whether the crew was performing tear-off or replacement, it would be incorrect to assume that the laborers’ average hourly costs would differ. It would also be inaccurate to conclude that the company should not profit or include overhead expenses in the same proportion percentage-wise for removal tasks as it would replacement tasks.
What about Other Trades?
Estimators will inevitably encounter numerous trades, all of which have varying costs involved. With that in mind, it is essential to realize that it is not just roofing trades that may require Retail Labor Rate corrections.
Take the HVAC trade, for example. If an estimator is allowing for costs to remove and replace a packaged A/C and furnace 5-ton rooftop unit, he or she could expect the removal to include disconnection of electrical, natural gas lines, the evacuation of refrigerant, etc. These tasks would most certainly require specialty trade workers. The costs associated with correcting the trade selection for the removal (-) activity is the difference between $126.39 for ‘DMO’, and $303.03 for ‘HVC.’
When Are Default Removal Retail Labor Rate Selections Adequate?
One must also consider scenarios in which the Demolition Labor ‘DMO’ Retail Labor Rate may be adequate. For instance, during fire and flood losses, restoration companies regularly utilize demolition laborers in lieu of specialty tradesmen. In another example, envision an abandoned rooftop mechanical unit with electrical or gas lines previously disconnected, with its internal refrigerant evacuated. The ‘DMO’ Retail Labor Rate may meet actual market costs in these situations, which is, of course, ultimately dependent upon who is performing the work.
Accurate estimation relies upon the assessment of each task, which can oftentimes be unique. An estimator must ask themselves which labor would be utilized for each item inputted. Corrections to Retail Labor Rates are not limited to only removal activities but also replacement. It would be inaccurate to assume that default labor associations within a given published pricelist item would meet any and all scenarios an estimator would encounter.
Ultimately, it is up to the estimator and the parties involved in a job to determine which items to use in an estimate, how they are applied, and the pricing.
