YOUR LABOR OVERRUN IS TWO NUMBERS.
When a job comes in over on labor, the job cost report gives you one number, and one number can't be acted on. Split it. The rate variance is what you paid per hour against what you bid per hour, and it's an office problem: a wage rate, a burden percentage, a classification or a crew composition that the estimate had wrong. The efficiency variance is how many hours the work took against how many it should have, and it's a field problem: production, sequencing, rework or access. The two have opposite fixes, and a company chasing the wrong one works hard for a season and moves nothing.
A foreman told he is over on labor when the whole overrun is a burden rate the office understated will hear that he is being blamed for arithmetic he never saw, and he will be right.
WHAT IT MEANS.
Labor variance is the difference between the labor an estimate assumed and the labor a job consumed, and it's always two variances added together: a rate variance from what you paid per hour, and an efficiency variance from how many hours the work took.
The split isn't an accounting nicety. It decides who owns the problem. An estimate that used $52 an hour burdened when the real burdened cost is $56 produces a labor overrun on every job the company wins, in every trade, in every season, with a field crew performing perfectly. No amount of supervision fixes it and every review meeting that treats it as a field issue makes the company worse, because it burns the credibility that a real production conversation later depends on. Split the variance and the argument ends in about four minutes.
WHY ONE NUMBER CANNOT BE ACTED ON.
The burdened rate in the estimate isn't the burdened rate on the books
This is the most common rate variance and the least visible, because it's a single figure in a template that somebody set once. Base wage plus workers compensation, payroll taxes, general liability, union or benefit load, per diem and small tools is a stack, and each layer moved since the rate was last computed. Workers compensation alone can move several points on one experience modifier change. A company bidding at a rate two years stale is short on every hour it sells, and the report calls it a field overrun every time.
The crew that worked the job isn't the crew that was bid
A bid built on sixty percent journeyman and forty percent apprentice at a blended $50 an hour, run at eighty five percent journeyman because the apprentices were needed elsewhere, produces a blended $55. On 1,200 hours that's $6,000 of overrun with nobody working slowly and no rate error anywhere. It's a mix variance, it sits inside the rate variance, and it's the one variance that's usually a scheduling decision made by somebody who had no idea it cost anything.
A real production problem inside a total that looks small
The two halves can point in opposite directions and cancel. A job that ran two hundred hours long on efficiency while the crew that ran it was cheaper than bid shows a total variance near zero, and gets no attention. The production problem is real, it will repeat on the next job of that type, and the estimate that assumed the old production rate will keep assuming it. A near-zero total is the most dangerous reading on the report, because it looks like nothing happened.
The variance is computed at closeout, when it's history
A variance computed once, after the phase is finished, is a record rather than a control. The window where an efficiency variance can still be recovered is roughly the first third of a phase, while there's still sequence left to change, and that requires the split to run weekly on hours booked to date against hours earned to date. Most contractors have every piece of data this needs and compute it at the wrong time.
WHAT IT LOOKS LIKE IN DOLLARS.
One phase, bid at 1,200 hours at $52 burdened, so $62,400 in the estimate. It came in at 1,340 hours at $56 burdened, so $75,040. The total labor variance is $12,640 over, which is 20 percent, and this is where most job cost reports stop. Everything useful is in the next two steps, and neither of them needs data you don't already have: you need bid hours, bid rate, actual hours and actual rate.
Actual rate minus bid rate, times actual hours. Four dollars times 1,340 hours is $5,360, which is 42 percent of the overrun. Nothing in that figure is a field result. It's a burdened rate the estimate had wrong, or a crew mix that came in richer than bid, and it will repeat on every job until somebody recomputes the rate stack or prices the mix properly. This is also the half a project manager can't fix, which is why holding him to the total is a way of teaching him to distrust the report.
Actual hours minus bid hours, times the bid rate. One hundred and forty hours times $52 is $7,280, which is 58 percent of the overrun. That's a production result and it's the field's to own, with the usual causes in order of frequency: access and sequence, rework, an assembly the estimate priced at a rate the crew has never achieved, and manpower loading. Notice that $5,360 plus $7,280 is $12,640, the whole variance, with nothing left over. The split is complete rather than approximate.
Where a bid carries classifications, the rate variance splits again. Recompute the bid blended rate using the classifications that really worked the job, and the difference between that and the original blended rate, times actual hours, is the mix. Whatever is left in the rate variance is a true rate error. This is worth doing on any prevailing wage or certified payroll job, where classification is the largest single lever on labor cost and where a well meant substitution is expensive.
An efficiency variance over 10 percent in one week is noise. The same variance in two consecutive weeks is a direction, and it's the point at which the sequence can still be changed. A rate variance of any size in the same direction across three jobs isn't a job problem at all and belongs at the estimating table, not in a job review.
THREE THINGS, AND THE FIRST ONE IS WEEKLY.
Every open phase, every week: hours booked to date, hours earned to date at the bid production rate, actual burdened rate to date, and bid rate. That's four figures and it produces both variances. Run it Monday off the prior week's timecards so the conversation happens while the sequence can still change. A phase reviewed weekly gives you eight or ten chances to act; the same phase reviewed at closeout gives you none, and both reviews use the same data.
The efficiency variance goes to the project manager and the foreman with the phase and the production rate the bid assumed, which means the estimate has to be readable by the field in the units the field works in. The rate variance goes to whoever owns the rate stack, and it goes as a recomputation rather than as a complaint. Two different meetings, and the second one is quarterly rather than weekly, because a rate stack doesn't move every week.
An efficiency variance that repeats across three jobs of the same type is a bid assumption that has never been true, and the fix is to change the production rate in the assembly. That's the only way a variance stops recurring. Every job teaches you one number; a company that captures it wins the next bid at a price it can build, and a company that doesn't reprices the same mistake for years.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing, no payroll, and no add-ons.
Pricing
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
FREQUENTLY ASKED.
