In principle, estimating on-site labour costs is very straightforward - just multiply the hourly rate of pay by the number of hours required to complete the job.

For example, if an installation is likely to take 2 people 8 hours to complete and they're paid $25 per hour, the calculation would be:

Labour hours (or 'man hours'):

        2 people x 8 hours = 16 hours

On-site labour cost:

        16 hours x $25 per hour = $400

However, in practice there are a few extra variables that you need to build into the estimates. Here are some of these variables.

1. Different pay rates

Your team of installers might include people paid at different rates, depending on their level of responsibility. For example, if you had one leading hand and one apprentice on-the-job for one full day, their labour costs might be as shown below.

        Leading hand:  8 hours x $32.50 per hour = $260.00

        Apprentice:      8 hours x $13.50 per hour = $108.00

        Total cost:                                               = $368.00

If you normally use this combination of workers for your installations, you could add the two amounts together and call the labour rate:

        $32.50 + $13.50 = $46.00 per hour for a two person team.

2. Overtime

If a job needs to be completed quickly, you may have to pay your workers overtime, or ask them to work on a public holiday. A typical overtime allowance is 50% on top of the standard wage.

Let's say our two-man team will spend 10 hours on the job to finish it in a single day, with the last two hours paid at a 50% overtime allowance. The first step is to calculate the overtime rate.

If you're using a calculator, you'll probably be able to press the function keys as shown below.

$46 50   $69 per hour

Note that not all calculators operate in the same way, so you may have to vary the sequence of keys to add a percentage.

Alternatively, you can simply multiply the original figure by 1.5 - which is another way of saying that the overtime rate is 150% of the normal rate. In other words, 150% expressed as a decimal is 1.5. Therefore:

        $46 x 1.5 = $69 per hour

For a more detailed explanation of percentages and decimals, and examples of how to use them in calculations, go to the lesson in Making measurements called: Decimals and percentages.

Now that we know both rates of pay, we can calculate the total amount payable for the 10 hour day.

       Normal pay:   8 hours x $46 per hour   = $368

       Overtime:       2 hours x $69 per hour   = $138

       Total pay:                                            = $506

3. Downtime

'Downtime' refers to the times when the team is getting paid but not actually working productively.

Obviously, you want to minimise downtime as much as possible, but there will always be a certain amount of non-productive time spent on the job.

This could be because workers are cleaning up, having breaks, re-parking vehicles, and so on.

There may also be times when workers have to attend toolbox meetings or site induction sessions. And there might be occasions when a mistake is made and work has to be redone.

So you need to build in an allowance for downtime that reflects the actual amount of time your team spends on the job, rather than simply charge the time it takes to carry out a task at maximum efficiency.

Many flooring installers add between 5% and 15% to their time estimate to allow for downtime.