Hiring a tradesperson is something that should not be taken lightly. As with any other employee, the value that the new person will add to the organization needs to exceed the cost of their service, so it’s important to know what that cost really is.
The cost of a tradesperson for most accounting purposes is usually taken as the cost of wages plus benefits, but the real cost can greatly exceed that.
The components of the direct, reported cost of employing a tradesperson usually include the following:
- Direct straight-time wages
- Vacations and other paid holidays
- Health benefits
- Retirement benefits
- Compensation insurance premiums
In addition to these, the costs that are not usually reported but are a real part of the cost of getting maintenance work done can be considerable and include:
The capital, operating and maintenance cost of facilities, including
- Trades’ vehicles
- Washrooms and locker rooms
- Parking spaces
- Tools of all kinds
- Personal protective equipment, coveralls, etc
- Tool storage
- Janitorial service
- Payroll service
- Hiring and training costs
- Computer terminals and their support
Unproductive time, including
- safety meetings
- other meetings
- unproductive waiting time (especially on shift)
These are the factors that contribute to the total hourly cost of a tradesperson, and calculations have shown that this total cost can be in the order of 2-1/2 to 3 times the straight-time hourly wage rate. These costs do not include the materials that tradespeople use to complete assigned work.
And of course, the cost of executing any particular job may vary widely depending on the effectiveness with which tradespeople are employed. Eliminating restrictive work practices and improving planning and scheduling can dramatically reduce the cost of any maintenance work assignment.
I have, on occasion, heard maintenance managers claim that they don’t worry about their maintenance labour cost, because the tradespeople are always there anyway and have to be paid, so there’s nothing they can do about it. That attitude toward costs is a very good start to going out of business. I’ve had the experience of visiting many plants which have had to drastically downsize their operations and in nearly all cases, the facilities and equipment needed to support their old, large maintenance work force have been removed or converted to serve some other useful purpose. Keeping tradespeople around when they can no longer provide a service that is worth more than their cost needs to be avoided, no matter how difficult and painful that is (see “The Maintenance cost-reduction conundrum ”).
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Don Armstrong, P Eng
President, Veleda Services Ltd