Ready to take control of labour costs & allowables? The importance of manpower in the construction sector cannot be overstated. Despite the rapid growth of automation and machine learning within industries such as aviation, healthcare, and manufacturing; several areas in the construction industry continue to be human-led and reliant on manpower.
As is the case with most technological advances, there are pros and cons to this relative lack of automation in the engineering and construction sector. However, the construction industry’s most successful contractors agree that using industry-specific technology is critical to accurately manage manpower and its associated costs.
Why it matters
Depending on certain factors’ such as construction type, duration and region labour costs can comprise up to one-third of a project’s total expenses. This figure is even more important when you consider that contract margins are continuing to decline in most global construction markets.
For this reason, all cost elements related to a construction project (incl. materials, subcontractors, plant and equipment) as well as indirect costs need to be managed in their own unique, yet integrated, way. The same applies to labour or manpower costs.
Moreover unlike material, subcontract or equipment expenses labour costs are diverse and more complex to control. The mismanagement of these can lead to nightmare scenarios for employers and even a fractional discrepancy could significantly impact your ability to deliver a project on time and within budget.
The importance of calculating accurate labour costs & allowables
RIB wealth of experience can help contractors efficiently control and monitor project labour costs in a multitude of ways.
One of the areas many contractors ignore is the true cost to company (CTC) of their employees. This results in them charging a cash cost only to currently running projects which could lead to insufficient provision or incorrect charging of employee benefits (non-cash cost), accumulated over years, to an incorrect project or overhead of the company.
To avoid this, RIB solutions can estimate and cost labour components together with correct cash and benefit computations on a real-time usage basis. Effectively, this allows contractors to compare budgeted costs to the actual costs (CTC) incurred by labour and create adequate provisions for paying out benefits and statutory allowances as and when required.
The same real-time benefits that support CTC computations also apply to tracking overall labour costs and ensuring productivity targets are met. RIB solutions are tailor-made for the construction industry and help to avoid the perils of using generic payroll systems, which report labour costs after payroll finalisation.
With RIB BuildSmart, accrued labour costs can be recorded by activity and assigned cost codes from the minute that employee time and cost allocation are loaded and calculated. Combined with RIB Candy, contractors can then compare, in real-time, actual man-hours and activity costs against their estimates.
This unique and combined solution from RIB provides project teams with ample time and opportunities to enforce corrective actions and effectively avoid a loss that, without real-time tracking, would most certainly have been incurred.
Cost & Allowable (budget) comparisons
The internal labour cost has a productivity element that can vary from activity to activity and according to working conditions within a project. To manage this, a project team needs to know how the labour cost was estimated and what has been achieved throughout the progress of a project.
Candy has the unique ability to generate allowable costs in terms of man-hours as well as by activity. This provides the cost value of the man-hours that were estimated to be spent based on the work done by activity. Similarly, BuildSmart’s payroll module is designed to capture man-hours and cost at activity level, which is at the same level estimated in Candy. By utilising both Candy and BuildSmart, a project team can compare labour costs and allowables (budget) at a granular level from the outset of a project.
Costing for the future
Construction cost management will likely become a more challenging prospect in the near term as project employers and clients become more price conscious amid wider global economic challenges. In such challenging market conditions, digitising cost control operations is essential so actual spending correlates with estimates calculated at the start of the project.
RIB ecosystem of construction-specific technology is geared to ensure contractors can price and deliver projects in the most cost-effective manner. Maintaining on-time and accurate payments to your workforce is critical in looking after one of your most important assets your people. This, however, is only part of the process and by adding accurate and real-time costing, you’ll enjoy a competitive edge when managing your projects.