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Prime Cost Of Labour % Addition

Prime Cost Of Labour % Uplift and what is it meant to cover, you will be surprised

I thought you might be interested in the Prime cost of labour article, it discus’s what should be included in your % uplift, it’s something we are often asked about the %’s.

The Excel sheet calculates the prime cost of labour and then allows you to adjust for hours, distance and blend of labour. The rates are from the JIB book, see reference.

The prime cost of labour as defined by the RICS/ECA should take into account several factors.

Say

Contractor A

25 miles shop to site

The prime cost of labour £25.66  Cost £27.12 (inc travel 37.5 hrs)

Contractor B

85 miles

Prime cost of labour £25.66  Cost £36.13 (inc travel/lodge and o/t 50 hrs )

So the % uplift for contractor B to get breakeven on cost is (£36.13-£25.66/£25.66) = 0.40 or 40% uplift

Let's say Contractor B needs 30% on labour to cover 6.1 (see attached)

£36.13+30% = £46.97

Therefore contractor B needs  (46.67-25.66/25.66) = 0.81 or 81%

So you would state 81% in this example uplift to the prime cost of daywork for labour.

Contractor A

So the % uplift for contractor A to get breakeven on cost is (£27.12-£25.66/£25.66) = 0.056 or 5.6% uplift

Let's say Contractor A needs 30% on labour to cover 6.1 (see attached)

£27.12+30% = £35.26

Therefore contractor A needs  (35.26-25.66/25.66) = 0.37 or 37%

So you would state 37% in this example uplift to the prime cost of daywork for labour

What else does the uplift take account of?

In this example contract A cost is £27.12 and charges £35.26  = £8.14 per hour and that has to cover 6.1 (a) to (t)

Whereas contract B cost is £36.13 and charges £46.97  = £10.84 per hour and that has to cover 6.1 (a) to (t)

RICS-ECA Prime cost of labour 2020 and Labour gang calculator

Most main contractors are kind enough! to pre-state what your % uplifts are typically 50%, so always include your % daywork rates in your tender letters.

Now let's take a closer look at (a) to (t) that your % addition to the prime cost of labour should include as stated in the PDF extract;

  1. Head office charges
  2. Site staff inc site supervision???   This could be a heavy cost if there are two operatives and you have to have a supervisor solely for them
  3. Additional cost of overtime, yes we have covered this
  4. Time lost due to inclement weather? Not often applies to the electrical trade, more for brickies being rained off etc
  5. Bonus payments, applicable if you pay this, the cost should be reflected in the % uplift
  6. Apprentice study time,
  7. Lodge/subsistence, yes this is covered in the calc sheet
  8. Fares, ditto
  9. Sick pay, no this isn’t covered in the calc, small allowance for this might be appropriate
  10. Employers liability insurance should be part of your 30%, but you may look at this as a cost per head and apportion it
  11. Redundancy payments
  12. NI payments are covered in the sheet
  13. Tool allowances, not usually added, but if you are supplying tools such as drills not picked up as a plant charge
  14. Use of maintenance and none mech hand tools
  15. Use of erected scaffold staging tressel or the like, ie steps
  16. Protective clothing, masks, and artificial lighting could be costly, as well as welfare facilities and storage that may be available on-site, so if you have to store 500 widgets to be installed under a days work your % should cover this cost.
  17. Variation to basic rates, ie D2 site
  18. Catch all, any other obligations
  19. Any welfare/pension payment is covered in the sheet prime cost now.
  20. They have saved the best till last ……… Main contractor profit.

As a general rule, we state in the model tender letter as below, but where the project is some distance you may want to be at a higher % on labour.

Most main contractors are kind enough! to pre-state what your % uplifts are typically 50%, so always include your % daywork rates in your tender letters.

Extract;

  1. Dayworks uplifts are; labour +XX%, materials +XX% and plant +XX%. Labour would be based upon the prime cost of labour as defined by the RICS/ECA/HVCA. Materials would be trade price plus delivery and plant would be the minimum hire charge as published in the HSS price list for the period on-site, not time used.

Daywork rates are something that we get asked about a lot the basics are simple but to be for warned is for-armed.