Labor Burden and Overtime on a Crash Schedule
A client wants a 16-week schedule compressed to 12 weeks for a 30,000 sq ft office fit-out. Your estimate assumed 5,000 electrician hours at straight time with a loaded rate of $58/hour that already includes 32% burden (payroll taxes, insurance, benefits). To compress, you would run 10-hour days and Saturdays, pushing roughly 1,200 of the hours into overtime at 1.5× base wage. Base wage is $40/hour; burden applies to base wages and generally does not apply to the overtime premium portion in the same way. The client asks for a single accelerated price and expects it to be 'just the labor delta.'
1. Compute the labor cost impact of the crash schedule, being careful about how burden interacts with overtime.
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Separate base wage, burden, and the overtime premium.
- Straight-time baseline: 5,000 hours × $58 loaded = $290,000. (Loaded rate = $40 base + 32% burden ≈ $52.80 + other loadings to $58; use the given $58 as the all-in straight rate.)
- Overtime premium: The 1.5× applies to base wage. The premium portion is 0.5 × $40 = $20/hour on the 1,200 OT hours, i.e., 1,200 × $20 = $24,000. Burden typically attaches to the base wage but not to the premium half, so do not multiply the $24,000 by 1.32 unless your payroll practice says otherwise - confirm with finance.
- Productivity loss: 10-hour days and six-day weeks reduce productivity. A common planning allowance is 5–10% on the affected hours. On 1,200 hours at $58, a 7% loss is about $4,872.
Total labor delta ≈ $24,000 premium + ~$4,900 productivity = roughly $29,000, before markup. The key judgment is not applying full burden to the premium and not ignoring fatigue-driven productivity loss.
2. The client says the delta looks high and asks you to 'just absorb it into the schedule savings.' How do you respond?
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The schedule savings accrue to the client, not to you, so absorbing the cost is not justified. Frame it plainly:
- The acceleration is a client-directed change in performance, and the cost is a direct consequence.
- The overtime premium is a real payroll cost; the productivity loss is a real field cost. Neither disappears because the schedule is shorter.
- Absorbing it sets a precedent and erodes margin on a job already compressed.
Offer options: (a) price the full acceleration; (b) accelerate only the critical-path portion to reduce OT hours; (c) keep the 16-week schedule and avoid the premium. Present the trade-off rather than conceding. Document the client's direction and the basis of the delta so any negotiation is transparent.