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Calculate your own hourly charge-out rate

52

Calli Pieterse presents the first of two articles to help electrical contractors understand how to determine company labour charge-out rates for tender
purposes. This article focuses on calculating nett pay rate and company contributions.

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Calli Pieterse

A question every electrical contractor must work out for himself is, how much should I charge per hour for my services?

The answer is simple: Charge as much as is feasible and as the market will bear, but dont charge less than your companys recovery rate that is, whatever it
costs you to survive.

How does one arrive at a working figure? The calculations are fairly straightforward, as we will show in this and future articles.
Please note that the figures used in the following examples are fictitious and should not be used for actual calculations.
Factors
Several factors must be taken into consideration when preparing accurate charge-out rates.

These are:

Nett pay rate: Calculated as per A.

In the following examples, we have labour rates applicable to Area A (Area A is defined by the Industrial Council, including the PWV area and certain areas in
KwaZulu-Natal). Where the term labourer is used, we assume that it is an elconop 1. A contractor wishing to calculate rates for other labour categories should
use the average hourly rate for these categories in his employ.
Company contributions: Calculated as per B. Please note that we based our calculations here on a company working a 40-hour week. Contributions should be
re-calculated for companies working 45-hour weeks since it would make a significant difference to the percentages obtained.
Overheads: Calculated as per C
Site overheads: Calculated as per D

To arrive at a charge-out rate, one needs to add all of these factors together .Assuming theoretical values for A, B, C and D, the final calculation for a fictitious
company will look like this:

Example 1 (average artisan rate only)

Assume:
A = R18,00/hr
B = 40%
C = 50%
D = 80%

Therefore:

Nett pay rate (A) = R18,00

Company contributions (B)

@ 40% = R7,20

Office overheads (C)

@ 50% = R9,00

Site overheads (D)

@ 80% = R14,40
= R48,60/hr

Example 2 (average labourer rate only)

Substitute A with R6,00/hr and assume that B, C and D remain 40%, 50% and 80%.

Then:

Nett pay rate = R6,00

Company contributions
@ 40% = R2,40

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Office overheads
@ 50% = R3,00

Site overheads
@ 80% = R4,80
= R16,20/hr

To arrive at a charge hour rate for a labour team consisting of an artisan and a labourer or an artisan and two labourers, simply add these results together.

For example:
Artisan = R48,60
Labourer = R16,20
= R64,80

Or:

Artisan = R48,60
Labourer (1) = R16,20
Labourer (2) = R16,20
= R81,00/hr

Table 1: Calculating the extra-over in wages or company contributions.

Artisan Labourer
Average wage rates basic/nett R75,00 R25,00
Average wage rates basic/nett 52 weeks R156 000,00 R52 000,00

Calculate as follows:

Actual wage rate per year:

40 hours per week x 49 weeks
productive/recovery period R147 000,00 R49 000,00

Leave pay:
Rate x 8 hrs x 15 days
R9000,00 R3000,00

Leave bonus:
Rate x 8 hrs x 20 days (electrician) R12 000,00 R3000,00
Rate x 8 hrs x 15 days (elconop 1)

Public holidays average/year:

Rate x 8 hrs x 12
R7 200,00 R2 600,00

ECA Levy:
52 weeks x R10,31
R536,12 R536,12

Building Council levy:

52 weeks x R12,63 (electrician) R262,60
52 weeks x R5,05 (elconop 1) R656,76

Medical aid, subject to individual company

policy:
Average of 6 % total and 50%/50% split
R4 680,00
employer part: 3%
Sick benefit fund:
R 20,80 R 20,80
52 weeks x R0,40
Pension fund:
52 weeks x R236,86 (electrician) R12 316,72 R4 922,84
52 weeks x R94,67 (elconop 1)
Workmans compensation:
52 weeks x 2,4% x rate x 40 hrs (electrician) R3494,40 R1248,00
52 weeks x 2,4% x rate x 40 hrs (elconop 1)

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12/10/2017 Calculate your own hourly charge-out rate - EE Publishers
UIF: R1560,00 R1235,00
52 weeks x 1% x Ratex 40 hrs (electrician)
max R148,00/month
52 weeks x 1% x Ratex 40 hrs (elconop 1)
max R148,00/month

CBL Non-members Collective Bargaining Levy

Only applicable to non-ECA member add as per Main Agreement if

applicable

Others:
R1560,00 R520,00
SETA/SDL etc. Say 1%
Total cost/annum R198 464,80 R65 825,36

Minimum cost/hr = 47 productive weeks x 40

hrs/week R35,01
R105,57
Total cost divided by 1880 hrs

Additional cost/hr (total rate minus actual rate) R30,57 R 10,01

Additional cost/hr in percentage/category per

40,8% 40,1%
employee add-on cost

(Note: The figures in these examples are purely theoretical and should be replaced with actual figures calculated by the electrical contractor for his own project
and/or maintenance section.)

These examples provide a labour pay-out figure for artisans and labourers, inclusive of tax deductions.

The next step in our theoretical calculation will be to calculate the so-called extra-over in wages or company contributions which the employee may not see in
his wages, but which the company contributes as part of his pay package (see Table 1).

It is important to note that all calculations are based on National Bargaining Council (NBC) agreement and exclude other agreements within a company i.e.
production bonus, medical aid, bursaries and so on.

The figures used in these calculations and in the articles to follow in this series are for illustration only. They are not actual figures to be used for tender purposes.

Readers must do their own calculations using figures pertinent to their own areas and operations, to obtain accurate working figures.

For more information, contact the ECA(SA) head-office on 011 392-0000

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