Pay Rates

Calculation of the cost of employment.

Cost of employment calculator

For several years now the Association has published a table of recommended charge-out rates for members. That table was based on a calculation of approximate costs for a hypothetical typical plumbing business to supply a tradesman, to which was added three separate figures each of which were designed to represent the estimated overheads of different sized businesses. For example - for a typical low-overhead contractor, the overhead was calculated at 80% of direct labour, while other examples were designed to represent contractors with typical higher overheads. They were, however, only approximations as the costs and the productivity of businesses can differ widely across the plumbing industry.

The importance of calculating 'Cost of Employment' is obvious. A business, which doesn't set charge-out rates high enough, will sooner or later go out of business and in the process it can drive rates down to unsustainable levels. On the other hand, contractors who set rates too high will need to ensure that it can develop competitive advantages on areas other than price if it's not to lose out on work.

It is, however, unrealistic to attempt to set a blanket 'Cost of Employment' across the plumbing industry.

Apart from the legal implications of price-fixing, the cost of doing business will vary depending on the nature of the business and on the proportion of its overhead to direct labour. For example - the focusing on sewer clearances and minor domestic maintenance jobs will mean increased vehicle costs as well as a lot of non-chargeable time in comparison to those who, for example, work on commercial construction.

In response to a large number of enquires received by the Association, we set out below a sample calculation of 'Cost of Employment' based on the costs of a hypothetical business.

The example is based on a number of assumptions and is a guide only. Members should look at their own business records and other information in order to accurately calculate an appropriate charge out rate.