How to Calculate Indirect Labor

How to Calculate Indirect Labor in Construction.
Labor not assigned to a specific task or process is called indirect labor.

Total indirect labor in a construction company is the sum of:

• The indirect hours of each project in progress.
• The indirect labor of the company in the engineering, budgeting, quality control, purchasing, sales, administration, accounting, finance, etc. departments…

At this stage, we will consider the indirect labor of the personnel affected only by the quoted project.

General to Estimate Indirect Labor

We have already allocated the costs of personnel operating machines or vehicles to the “Cost of equipment” step.

Indirect cost summary sheet

In this sheet, we see the indirect labor costs grouped according to the task performed by the personnel.

How to Calculate Indirect Labor for a Project

Indirect labor costs group together wages paid to workers who perform tasks that are not directly involved in actively converting materials into finished products or providing services.

The following are the relevant aspects to be considered when estimating the indirect labor costs of a bid.

Salaries of Safety and Environment Department

The safety and environment department is an autonomous group in charge of ensuring safety and environmental conservation.

Undoubtedly, its most important function is to audit each task to avoid incidents and/or accidents.

Therefore, this department reviews and approving the procedures for the execution of tasks.

Salaries of Quality Control Department

This is another autonomous department that is in charge of:

• Execution of tests and samples in civil works.
• Control of the traceability of the pipelines in terms of the certification of the materials and non-destructive tests.
• Checking compliance with the technical requirements stated in the datasheets for equipment, instruments, electrical panels, and each material entering the site.

This department is autonomous and depends on the quality control of the company’s central office.

Supervisory Staff Salaries

The site supervision group comprises the project manager, forepeople, supervisors, etc.

The work management is in charge of the work director who is the professional figure in charge of the supervision, follow-up, and control of the project.

The tasks performed by the project manager are multiple and may require the support of a multidisciplinary team.

Major tasks of the project manager, for instance:

• Look at that the resources foreseen to implement the project complete the plan of works in time and form.
• Control, through forepeople and supervisors, that we execute the accords to the plans and technical specifications and with the scheduled performance.
• Verify that their personnel and those of the subcontractors comply with the quality and safety standards established in the tender documents.
• Execute the certification of the work carried out, in time and form, to get payment.
• Check compliance with current labor requirements.
• Monitoring environmental standards consent, etc.

General Services Department Wages

This department ensures the timely provision of basic services for each work, for example:

• Supplying industrial water of the right quality for sanitary use, cleaning, concrete, testing, etc. We can get this supply through the drill of wells.
• Supplying drinking water for staff consumption, usually through hot and cold water dispensers.
• Supplying electrical energy if requested by the client in the tender specifications. The above implies the use of owned or rented generators.
• Maintenance of the toilets for the employees.
• The best option is the chemical toilet with sinks.
• Maintenance of personnel transports vehicles that take workers from their lodgings to the construction site and back again.
  For this, we can resort to minibuses with less than two years of use.
  In general, vehicles are required to have speed control equipment.

We emphasize that the safety department issues the authorization for its operation.

• Maintenance of the telephone and Internet communication system.
• Labor for the maintenance of construction machinery and the supply of fuel and lubricants.
• Another daily task is the transfer and removal of all work equipment from the site.

Administrative Department Salaries

• The administrative department controls:
• The documents of personnel income.
• The number of hours worked.
• The deposit of salaries in due time and form.
• Minor purchases, etc.

Warehouse Staff Wages

They are in charge of:

• Manage construction materials.
• Input and consumption materials.
• Spare parts.
• Stock control.
• Tool delivery and storage.
• Issuing reports, etc.

Salaries of the Surveying Service

The surveying specialist and his collaborators must ensure the correct placement and leveling of all the elements that are built or assembled.

Wages consumed in the mobilization and demobilization of the work site

The cost of the work includes wages for:

• The assembly and disassembly of the workshops.
• The mobilization and demobilization of the work sites.

Wages for search of existing buried installations

In this section we impute the salaries incurred to detect existing installations on the site:

• Cathodic protection cables.
• Grounding cables.
• Irrigation pipes, etc.

We will discuss this section in more detail in the next post, how to Estimate other Indirect Costs of the Project.

Read also “How to Calculate the Indirect Man-hours of a Proposal” posted on Oct 3, 2019.

How to Calculate Indirect Labor – Calculate Man Hours