If you are budgeting or planning or costing and it involves the cost of labour, what numbers do you use?

Apart from a base salary, you are also up for super (9%) workcover (rate varies) leave loading (??) and maybe payroll tax (4.75% for wages over $1.1M).

And because of awards / contracts / agreements, you are up for holiday pay, sick pay, & special leave. And don’t forget public holidays.

And if that isn’t enough, downtime may still arise due to travel, weather conditions, industrial stoppages, training, meetings etc.

Had enough yet!!! And no mention yet of long service leave!!!

So a car mechanic / painter / salesman, being paid $50,000 base, could end up costing you.

$50,000 + 4750 (super) + $1500 (workcover at 3% but it could be more or less) + 670 (leave loading at 17.5%) i.e. $56,920-

But over how many weeks per year.

Try 52-4-2-2 = 44 (holidays, public holidays, sickness)

Finally, what if you can only charge out 75% of the employee’s time during those 44 weeks, because of reasons cited above. Now we’re down to 33 weeks (44 x 75%).

So, the cost you need to recover i.e. nearly $57,000-, needs to be effectively recovered in only 33 weeks.

This equates to 56920 x 52/33 = $82,690-.

And that’s more than 60% above the base.

And it could be worse, but not much better.

If you had perfect productivity, your real cost is 56920 x 52 / 44 = $67,270.

Or nearly 35% above base.

So the way to be more competitive, when labour is involved, is all about being more productive.

And to be more “anything”, you need to be able to “measure”.

Knowing your employment cost is just something you need to know.

On an hourly basis (using 37.5 hours / week) if your employees cost $56,920- pa and you only get 33 weeks x 37.5 hours pw to recover, the hourly rate cost = $46 per hour.



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Quote By – Sir James Dewar

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