Labor cost is a term to decide how much money the laborers will receive for their work plus the benefits.
Labor cost in construction Philippines has different calculations for each work. As the employees, you have to understand how much you have to pay them.
Working in construction has high danger and risk since the workers are involved in heavy work every day.
The amount they will get should be adjusted with the burden they work on the site. There is a calculation that you have to understand as a worker to know how much you deserve.
Even though you work for a personal person, not under the company, the government of the Philippines has decided the average pay for the construction site.
How much will they get and how to calculate their fee? Here is the information about the labor cost in the construction.
How to Calculate Labor Cost
1.Direct VS Indirect Construction Labor Cost
- Direct labor cost
The direct labor cost in the construction means that the payment will include the regular working and also overtime hours of an employee or workers.
The employees should include other parts such as medical funds, tax, and transportation.
The direct labor cost in construction Philippines is very important to see the profitability of construction companies and also from the construction worker position.For the company, they will reflect on how much money is spent on the workers. The workers can see their worth.
How to calculate direct labor costs and how much to build a house in the Philippines as example? You have to record how many hours the employees work on the site, and then the hours are multiplied by their rate.
For example, if their rate per hour is ₱200 and they work for 5 hours a day, they will get ₱1000 per day.
- Indirect labor cost
Indirect labor cost means that the calculation is not only the employee fee and expenses but also suppliers and contractors.
This cost will accumulate among the whole people who are involved in the project, such as house construction cost Philippines.
Calculating the indirect cost is very important because the companies or employers can allocate the money to pay the laborers on the construction site. Usually, the calculation is during a period of the project.
This cost is the total labor wage, suppliers’ fee, and contractors’ fee.
2.Understanding construction labor cost as a percentage of a project
The percentage of the labor cost will depend on the burden of the workers themselves. Every project and every role will have a different percentage.
It changes, yet the average labor cost in construction Philippines has been decided by the local government in the Philippines.
- As per direct cost
Since direct cost is only the cost to pay the wage of construction workers, the percentage of labor cost in construction is only about 20-25%. It includes their tax and other benefits.
This is the reasonable percentage by labor market analyzer in the Philippines.
- As per indirect cost
It is different from direct cost since the indirect cost will calculate the whole expenses for suppliers and contractors. The percentage of the total cost is about 40%.
This number is reasonable, yet the maximum percentage. You have to manage the budget only up to this percentage for labor costs.
3.Calculating the base rate
The base rate means the total consists of benefits, tax, and wages. After that, the total is divided into the number of hours in a period.
The company or employer should take the consideration units produced or in construction, the laborers should reach the point according to the schedule.
Specifically, the contractors will have a schedule of specific actions to take by the laborers. If the work has not finished yet, they will add extra hours and it is in category of labor productivity rate in construction Philippines.
This concept will have different calculations but it is under the 20% percentage by the company.
4.Calculating the labor burden
The labor burden is heavier than normal calculation. The estimation can be higher because there will be hidden costs.
Since construction work usually has over time and is underestimated, labor burden should be carefully calculated in every project.
Before you are counting estimated cost to build a house Philippines or other buildings, you have to know the total direct cost and indirect cost. After that, the indirect cost is divided by the direct cost, then multiplied by 100%. The percentage is the labor burden.
This calculation is important to know the margins the company has to set.
It is normal when instruction work experiences inefficiencies. It should be minimalized, yet it is inevitable.
Some workers might have overlapping responsibilities in the field because there is no person to handle and manage them at the time.
Though it is a sign of poor productivity, incorporating inefficiencies should be in the margin and included in the 20% percentage of direct cost.
Usually, the companies will cut down on this with more knowledge and technology since it can drain the whole budget of construction.
Labor Price List in Construction
The labor cost in construction Philippines depends on the work they do in the construction work. The wage per hour for every position can be different in many areas in the Philippines.
|Types of Position||Rate per hour|
|Light skilled labor||₱64|
The labor cost in construction Philippines determines how much money the workers will get in the construction industry.
Usually, they get paid per hour according to the burden they have in their role. The amount will change based on the government’s policies.
References : psa.gov