Electrical Contractors and Outsourcing
Reliability, hiring and termination prices are persistent problems in the electrical contracting business. Thorough screening, screening and interviewing techniques can help stop reliability difficulties. The question is, do you have the time to do all these things and keep focus on the work website?
First review a listing of functions your company has to do in order to employ, maintain and retain a worker. Place a price on each item using the time value of the man who must handle each distinct item. For instance and simplification, your office manager earns $15.00/hour and spends a half hour a day dealing with employee problems. The time value is $7.50 to do that function. Do this for each item listed below and think of a daily total amount. Divide the total by 8 and determine if you're doing the functions cheaper compared to staffing firm can. Most electrical contractors can't because they're put up operationally, not administratively.
If you will need a guideline to compare prices, most staffing businesses charge a tiny amount on top of every hour charged; utilize 5-7% as a rule of thumb. Bear in mind this includes all labor burden costs including state/federal payroll taxes, worker's com, liability insurance, payroll processing, etc (see list for the remainder ).
Outsourcing your human resources function eliminates the need for:
Placing job advertisements, managing phone calls from advertisements, processing job applications,checking references,performing criminal background checks, scheduling and paying for drug testing (if required), scheduling and conducting interviews, controlling Worker's compensation insurance costs, maintaining liability insurance on workers, paying office staff human resources training,
Employee handbook development, security program development, management and injury reporting, payroll administration, mailing checks and establishing direct deposit balances, payroll tax accounting -- weekly payroll and yearly mailing of W-2's,
Time monitoring of field workers (electricians), supplying and administering health and savings plans, worker's compensation claims processing, processing unemployment claims, managing court ordered garnishments, paying lawyer's fees if a lawsuit is filed against your business, addressing and processing NLRB problems, coping with and paying for additional post-employment duties (wrongful termination suits, HIPPA alarms, etc)...and all the other time consuming costs not mentioned previously that dig to your bottom line!
What many electrical contractors don't take under account is the amount of time away from manufacturing and the amount of time their office staff adheres to recruitment, hiring and keeping each employee on the payroll. This is a variable cost outsourcing labour solves.
Going back to the numbers, variable costs are costs which can be diverse flexibly as requirements change; like the amount of electricians you will need to carry on your payroll at any particular time. The point made here is that labour is a far more flexible source than capital investment. Outsourcing labor supplies you and your employees with freedom from time consuming human resource capabilities. The time you save is better spent advertising, dealing with clients, suppliers, and focusing on the job at your project website.
Spend some time to add up the time and price of the listed functions involved with hiring and keeping electricians. Request a staffing company to supply you with a price breakdown of the hourly fee for each electrician's ability level. Bear in mind staffing businesses cover all of the costs you would and charge a minimal account management fee (the fee is generally much less than what companies spend on the list of HR functions). Compare the costs. Remember to take into account the intangible advantages of reduced liability, time savings and increased freedom to focus on your customer.
Most builders will agree that for any electrical contracting job, outsourcing is economical. 1 key point that has to be emphasized is outsourcing labour isn't a"one size fits all" solution to controlling factor expenses. Businesses that are comfortable where they are don't make good candidates. On the other hand, a company that wants to grow while keeping tight control over variable costs makes an outstanding fit.
We can never predict when an employee will opt to leave a company however we can control exactly what it will cost to replace that individual utilizing effective outsourcing strategies. Keeping the ideal mixture of permanent and temporary workers is the key to controlling the lowest variable prices in our industry -- labour. Outsourcing electricians permits you to control variable costs that are discussed in the next few paragraphs.
As you're aware, variable costs are the costs directly related to the rate of operations in electrical contracting. They're called variable since they change with the size and workload of the enterprise. It follows that the more jobs bid and won; the more labour, material, etc. prices will rise. The more labour costs rise, the more employee-related government costs go up.
This, of course, is compared with overhead or fixed costs. These costs are those which are incurred regardless of whether your company works one or ten jobs. These prices do not change as the rate and size of your operations change unless a dramatic change is made. Variable costs are job specific, whereas, fixed costs are linked to the entire firm. Office leases/mortgages need to get paid no matter what's produced or in what amounts. Hence rent or a mortgage is a fixed price.
Look at a scenario in which you decide your electrical contracting agency yields a 25% contribution margin. Your figure can then be used to ascertain whether variable costs for your job (s) can be reduced. You can opt to bump up the cost of materials and/or lower your labor costs.
Substance pricing adjustments is the easy part. Labor costs aren't. To attract and maintain quality electricians, you need to pay more than the competition, offer benefits and training.
Recall your bottom line or net profit depends upon how you choose to spend each penny of your contribution margin on fixed prices. We all know you can control your fixed costs by deciding how much to spend on vehicles, tools, equipment, phone service and all the rest of your business needs
But, what's the real cost to attract, hire, manage and retain a qualified electrician to get a 3 month project and what's the cost to employ a permanent/full-time employee? You likely know the answer, the price is the same. It's the replacement cost of the worker that will eat into your bottom line once you run all your human resource or human capital management functions in house. And what price do you put on the cost to bring someone new into your organization? And what does it actually cost to replace that individual? The solution is just the price of time -- your time, your staff's time and all time removed from job related tasks.