Payments for DIRECT COST OF DIRECT LABOR will be equivalent to the number of hours expended by each job classification multiplied by the applicable Direct Labor Rate. The Direct Labor Rate shall be based on the most current audit of the Consultant’s payroll and financial records. If a current audit is not available for the Direct Labor Rate or FAR Overhead Statement, the Direct Labor Rate and/or overhead costs shall be based on information acceptable to the City. The Direct Labor Rate shall not include any labor other than Consultant’s employees, including, without limitation, Consultant’s Contract Personnel. The Direct Labor Rate shall be based on a normal 8-hour day, 40-hour week (e.g., no overtime, holidays or weekend rates) and shall exclude any other form of compensation (e.g., no bonuses, stock options, profit-sharing or equity arrangements). If during the invoice period, Consultant has incurred costs other than the Direct Labor Rate, Consultant shall attach to its invoice to the City copies of receipts and invoices for such costs and expenses. In this latter case, the amount of profit earned by the employer may be outsized, if the demand for an employee is substantial.Examples of Direct Labor Rate in a sentenceĬost-Reimbursement task orders: Labor Categories, SOC Number, and Direct Labor Rate for each Task Order Labor Category. A further option is to simply set the labor rate at what the market will bear, which may be substantially greater than the cost of an employee. Instead, it is customary to build into the labor rate an apportionment of company overhead and a standard profit percentage, so that a long-term, fully-loaded cost is set as the minimum possible labor rate to charge. At a minimum, the labor rate cannot be lower than the incremental cost of the employee, since the employer would otherwise lose money for every hour worked by the employee. When a labor rate is to be used as the billing rate for an employee to a customer, a number of considerations must go into its calculation. This rate is typically aggregated for entire classifications of employees, so that (for example) the fully loaded labor rate for an average machine operator may be commonly available. For example, the cost may include the company's contribution to the employee's pension plan, all benefit costs, payroll taxes, overtime, shift differential, and the base level of compensation. This rate contains every possible cost associated with an employee, divided by the total number of hours worked by the employee. This information is most commonly used when a customer asks for a special production run at a reduced price, and the incremental profit must be calculated. The concept can yield widely differing results, since asking someone to work overtime yields a 50% higher incremental labor rate. For example, if an employee is asked to work one additional hour, the incremental labor rate will likely include the person's base wage, any associated shift differential, and payroll taxes. This rate is the cost of labor that will be incurred if a specific action is taken. Consider the differences and usages noted below: Incremental Labor Rate When a labor rate is used for defining the cost of labor, it can be further refined into the incremental cost of labor or the fully-loaded cost of labor. Labor rates are used to determine both the price of employee time charged to customers, and the cost of that employee time to the employer.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |