Wages and labour costs for a fence contractor business

What to take away

The two step derivation

Labour cost per installed hour comes from two calculations that most owners collapse into one.

Step one is the burdened hourly cost. Take the wage and add everything that follows from employing the person: employer payroll taxes, workers compensation, benefits, paid time off, and any other statutory contribution your state requires. Divide the annual total by the paid hours in the year.

Typical total burden runs about 20% to 30% of the wage once employer payroll taxes, workers compensation and modest benefits are added. Workers compensation alone varies by state and by classification, so read your own policy rather than a general figure.

Step two is the productive hour adjustment. Not every paid hour puts fence in the ground. Subtract these items after loading and unloading:

Burdened annual cost divided by installable hours is the number that belongs in an estimate.

The named quantities

Burdened cost is wage hours plus all three burdens. Divide by installable hours.

In symbols: let W be annual wage cost, B the total burden, P paid hours, and N non-installing hours. The naive rate is W divided by P. The rate that belongs in a quote is (W plus B) divided by (P minus N).

Two things follow. B raises the number. N raises it again, and N is the quantity a fencing business can actually change. That is why the same wage produces very different labour costs in two operations in the same town.

A worked example

Illustrative figures, rounded, for one installer:

The naive rate is $52,000 divided by 2,080, which is $25.00. Burden alone lifts the paid hour rate to $30.50. The quote needs $45.74 per installable hour.

Move the non-installing share from a third to a quarter and the same crew costs $40.67 an hour to install. The ratio, not the wage, is what moved.

Where the fencing hours hide

Travel. Fencing customers are spread out, and a job at the edge of your radius can cost an hour each way. On a short job that is most of the day.

Travel is usually the largest single category. On rounds with wide spacing it commonly runs 15% to 25% of paid hours. Loading, waiting on marks, weather and return visits make up most of the rest.

Loading and unloading. Every visit carries this cost, so a job that takes two visits pays it twice.

Waiting for marks. A locate request has a lead time and a validity window. A job scheduled badly against that window pays for a crew standing still, or pays for a return trip.

Cure delay and the return visit. Setting posts and returning to hang panels is two mobilizations for one job. Operations that batch setting and returning across nearby jobs recover much of this. Operations that work serially do not.

Weather. Frozen or saturated ground stops digging. If the crew is salaried or retained, those hours are paid and produce nothing.

Checking the pay assumption

Once the arithmetic is done, test the wage input against an outside source. The U.S. Bureau of Labor Statistics: Occupational Employment and Wage Statistics Tables publish employment and wage estimates by occupation, industry, state and metropolitan area.

Those estimates test plausibility for your area. They are not a rate card, and they say nothing about what your crew produces in a day.

If your assumed pay sits far below the local estimates, expect turnover. Price turnover honestly: recruiting time, assessment time, and the weeks before a new hire reaches the rung they were hired for.

The ladder defining those rungs is in the fence contractor hiring and training guide. The selection method is in how to hire reliable staff for a fence contractor business.

The rules that govern paid hours

Which hours must be paid is not a preference. The U.S. Department of Labor: New and Small Businesses compliance assistance material covers the federal wage and hour rules new employers meet.

It sets out how hours worked and overtime are treated and what records must be kept. Travel and waiting time have specific treatment, and both are common in a fencing day. Read it rather than assume it.

The U.S. Equal Employment Opportunity Commission: Small Business Resource Center sets out the anti-discrimination obligations that apply to small employers. Those reach pay decisions as well as hiring ones.

Whether someone is an employee or a contractor changes the whole calculation and is not a choice you make freely. Ask your state labour agency and your accountant, and keep the reasoning on file with the rest of the compliance side of fence work.

Cutting labour cost without cutting pay

The lever that works is N, the non-installing hours.

Route jobs by geography rather than by the order the calls came in. Batch post setting so return visits cover several jobs in one trip. Load in reverse order of use, so the first half hour on site is not spent unloading things nobody needs until the afternoon. Book locate requests against the schedule rather than against the sale.

Keep a load-out list so a missing item does not cost a trip. That is what the equipment checklist for new owners is for. Choose equipment that reduces handling, which is the argument in the fence contractor equipment and setup guide.

Running the calculation once a season

Common questions

What should I pay a fencing installer?

Nobody can answer that for your area without knowing your market, and a number in a guide would be a number for somewhere else.

Start with the metro figure: open the BLS Occupational Employment and Wage Statistics tables, find the occupation listed as Fence Erectors, and read the annual mean wage for your metropolitan area. Use the state row when your metro is not published.

Then set the rung. An entry helper, a competent installer and a lead who sets out and runs a truck are three pay points. Place your offer at or above the metro figure for the rung you are hiring, not at the bottom of the whole range.

Then test it. Put the wage through the burden and installable hour steps above. If the resulting rate will not carry your prices, the problem sits in hours or pricing, not in an underpaid crew.

Should I pay hourly or by the job?

Piece rates in this trade tend to trade speed against the checks that prevent callbacks, which is a poor exchange in fencing specifically. If you use them, be sure the quality checks are not the thing being skipped.

Is travel time paid?

That depends on the circumstances and the applicable rules, which is exactly why the wage and hour guidance is worth reading rather than guessing. Whatever the legal answer, travel is a cost that has to be recovered in the price either way.

How do I know my installable hours?

Record them. Split every timesheet into travel, load, wait, install and return. Within a season you will know the ratio, and it is usually less flattering than owners expect.