THE CREW BEAT THE BID. YOU CANNOT TELL BY HOW MUCH.
Piece rate transfers production risk to the crew and takes your production data with it. The job cost report shows a favourable variance whether the crew was quick or the estimate was generous, and framing has the thinnest margin of any trade to guess with.
On a $186,000 framing package with 14,400 square feet of wall area bid at $4.60 per square foot of labour, a crew paid $4.20 by the piece earns $60,480 against a $66,240 estimate and books a $5,760 gain. The same crew tracked hourly took 1,340 hours at a $38 burdened rate, which is $50,920, so real production cost was $15,320 under the bid and the piece rate captured $5,760 of it. Framing subs at $1M to $5M average 18 percent gross and 5 percent net before taxes, the thinnest of the 24 served trades.
Nothing here says piece rate is the wrong wage structure. It says a piece rate with no hours behind it removes the only data that tells you why a job made money.
This post covers one wage structure and what it does to a job cost report. That page covers how framing operates and where its margin goes across a year. Read CFO for Framing Contractors for the complete treatment, worked figures included.
WHY DO FRAMERS PAY BY THE PIECE?
Because it works. A piece rate moves production risk onto the crew, and a good framing crew on repetitive work will out produce an hourly crew doing the same scope by a wide margin. The crew earns more, the job costs less, and nobody has to supervise pace.
Framing labour ranges from $3 to $8 per square foot of wall area depending on region and complexity, with union metros reaching $8 to $12. On a wood frame tract or a repetitive multifamily wrap, piece rate is frequently the only structure that makes the numbers work at all.
So this is not an argument for going hourly. It is an argument about what you record while you are paying by the piece.
WHAT THE JOB COST REPORT SHOWS YOU.
Take a $186,000 package: 14,400 square feet of wall area, labour bid at $4.60 per square foot, so $66,240 in the estimate. Framing at $1M to $5M averages 18 percent gross margin, so the job holds $33,480 of gross profit and has very little room in it.
You pay the crew $4.20 by the piece. They earn $60,480. The job cost report shows labour at $60,480 against $66,240 and a favourable variance of $5,760, and the job closes at about 21 percent gross. Good job, well bid, move on.
Now the question the report cannot answer. Was $4.60 a good bid that a good crew beat by 40 cents, or was $4.60 a loose bid that any crew would have beaten by a dollar? Those two situations produce the same report and they call for opposite decisions on the next bid.
THE NUMBER NOBODY WROTE DOWN.
The crew worked 1,340 hours. Nobody needed that figure to cut the cheque, so on most framing jobs nobody captured it.
At a $38 fully burdened hourly rate, 1,340 hours is $50,920. That is what the production cost in labour capacity. The bid held $66,240. So the true distance between what the work took and what the work was priced at is $15,320, and the piece rate captured $5,760 of it. The crew kept $9,560, which is what a piece rate is designed to do and is a fair trade for taking the risk.
Nobody overpaid the crew. The point is that $4.60 per square foot was holding about 23 percent of slack, and the only place that fact existed was in hours nobody recorded. Next quarter you bid a harder building at $4.60 because the last one closed favourably, and there is no slack left in it.
MOST SUBS MISS THIS: PIECE RATE ERASES YOUR ESTIMATING FEEDBACK.
Here is the part to send to your estimator. A job cost system exists to tell you two separate things: whether the field performed, and whether the estimate was right. Hourly payroll against a unit bid gives you both, because hours measure performance and the bid measures pricing.
A piece rate collapses both into one number. What you paid equals a rate you negotiated times a quantity you measured, and neither of those inputs contains production time. So the variance line tells you the outcome of a negotiation, not the difficulty of a building.
Framing averages 18 percent gross and 5 percent net at $1M to $5M, the thinnest of any served trade. It is the trade least able to absorb a mispriced bid, and the common wage structure in it is the one that conceals mispricing best. That combination is why framers can have a good year and a bad year on the same work without ever finding out which was which.
THE ONE COLUMN THAT FIXES IT.
You keep paying by the piece. You add hours as a reported quantity, not as a basis for pay.
1. Crew leads report daily hours by cost code, same as an hourly job. It is a number on a sheet and it does not affect anybody's cheque. Say so out loud when you introduce it, because a crew that thinks hours are about to replace piece rate will not report them accurately.
2. The job cost report shows three labour lines: piece rate paid, hours worked, and implied hourly cost. Two of those you already have.
3. At close out, calculate square feet per crew hour. That is your production rate, and it is the number your next estimate should be built from.
4. Track it by building type. A repetitive apartment wrap and a custom home with cut roofs are different rates, and blending them is how a bid gets loose in one direction and tight in the other.
The whole change is one column on a timesheet that nobody gets paid from.
WHAT THIS IS WORTH ON $2.4M.
A framing sub at $2.4M averaging 18 percent gross holds about $432,000 of gross profit and about $120,000 of net at 5 percent. The 10 percent net target would be $240,000, so the spread is roughly $120,000 a year.
Production rate data does not close that on its own. What it does is stop the two errors that cost the most: bidding a hard building at the rate a repetitive one taught you, and walking away from work you could have won because you had no evidence your crews were quick.
The second one is worth more than it sounds. A framing sub who knows his crews frame 10.7 square feet per crew hour on repetitive wrap can bid that work at a rate a competitor guessing at 9 cannot match, and be more profitable at the lower number. That is the whole argument for measuring hours you do not pay from.
THE SHORT LIST.
FREQUENTLY ASKED.
