I work directly for a builder who focuses on “high end houses,” i.e., in the Atlanta area that would be $350k to $800k. Recently, he said that he wants his employees to start acting like sub-contractors, and, more specifically, to start bidding on specific projects.
I’ve done a lot of different things, e.g., trim work, central vacuum system installation, punch work, installing insulation, etc. In essense, whatever we needed done immediately.
I’ve installed and finished harwood floors (as an hourly employee) and they turned out extremely well. Now, I want to bid on the next house. I know that our current flooring sub gets paid $4.15 per sq ft for installing and finishing #2 oak. The portion of the houses that have hardwood usually runs about 2,000 sq. ft.
My question: if three of us “formerly employees – now subs” with hardwood flooring experience get the job, at what rate can we expect to install and finish the floor? For example, is 100 sq. ft per hour for both installing and finishing (obviously not on the same visit) too much or too little?
Sorry for the long post.
ChrisA
Replies
Chris I can't really help you with the numbers for hardwood flooring since
that out of the realm of what we actually do but when I read "formerly
employees - now subs" I see a potential problem brewing ( primarily for your
employer/builder that is but you could get all caught up in the mess if you aren't carefull).
If your former employer/builder does not follow or meet the IRS requirements
for what constitutes treating you guys as Independent Contractor or you guys
as a group as A Independent Contractor then no matter what he thinks or says
you are still employees and he would still be on the hook for things
like Social Security contribution, overtime, etc etc. If you use the Advanced
Search feature here and type in the keywords "IRS employee sub", set
the Updated From pop up menu to "Beginning of Time" and you will get
a lot of results with information regarding all that.
You'll also want to check out the IRS document Independent Contractor INDEPENDENT
CONTRACTOR OR EMPLOYEE Publication 1779. it's available in PDF format online
at http://www.irs.gov/pub/irs-pdf/p1779.pdf
Since I'm always sort of dubious and wary of builders who go from having employees
to sub only I wondering has he given you any real reasons as to why he doing
that? Sometimes there reasoning is solid and genuine but it been my observation
that 9 times out of 10 they are just trying to dump burden on their "former"
employees and dodge Worker Comp insurance and unemployment insurance. The obvious
potential downside is when your builder doesn't need you or have work lined
up for you will you have other clients lined up or will you put yourself on
unemployment? You need other clients anyway to meet the IRS requirements for
Independent Contractor status anyway. How are you going to get these other clients?
Are you guys going to form you own new subcontracting company or are you all
going to be separate independent contractors? Setting up and forming a Partnership,
LLC, or Corporation has it's associated costs too.
If you guys and your builder are all going to really be on the level you have
some more research and planning you all need to do.
By the way I don't think you or anybody else should ever apologize for making
long posts and yours wasn't that long at all anyway. To get real answers you
need to accurately describe situations and thinking and sometimes that can take
a bit of writing. How often to you see people here asking for more information
from people asking questions? And usually the best answers to those questions
are just as well thought out and sometime long too. You might want to check
out the Too
long a Posts discussion in the Woodshed Tavern for the debate on that
issue.
View Image
I don't paint things. I only paint the difference
between things.--Henri
Matisse
Jerrald,
Ditto. Maybe Jeff Buck will chime in.Ditch
One of my jobs, as an "employee," is/was to deal with legal issues. I've warned him that he would easily lose a legal battle under the Fair Labor Standards Act and Georgia's Workers Compensation Act. In the south at least, deliberate misclassification is extremely common.
ChrisA
A few points of clarification,
Are you only providing labor? Or do you use your own tools? Do you provide materials?
100 sq. ft. per hour? One hour for every thing or one hour for installing and one hour for finishing? Do you mean man hours or one hour of a 3 person crew?
I don't have many numbers for you but I thought others who do might have the same questions that I do.
4 bucks a s.f. "sounds" like labor only to me. Around here its about 2 bucks to lay 2 to finish. I don't finish but I lay it, my feeling is the finishers make out better, but they have more trips.
I think a competent installer should be able to lay 200 s.f. avg a day, but even 600 is possible. It's generally a one man job unless there are several rooms. You can make excellent money but you will have to be efficient and work for it.
What the others said about being changed to a sub. Sounds fishy.
I don't think alot of hourly guys lay 600 s.f. a day. Could it be that as hourly guys you were more expensive than the sub? My impression would be that your boss is wondering why he could have it done cheaper by a sub.
You could do stuff piece rate and still be employees. Your employer would have to withhold on your piece rate and pay workmens comp. Why not try that?Tom
FWIW, Means guide lists red oak, #1C, installed no finish, you provide materials, 25/32" x 2 1/4" at $5.30 / s.f., cost adjusted for Atlanta = $4.50.
Thanks guys for the responses.
Our boss is a nice guy and a great builder but he squeezes every nickel. I suspect that he thinks that we (the guys who work directly for him) will cost him less, on a time adjusted basis, if we become "true sub-contractors." By that, I mean we bid a fix price, including labor, equipment and materials, and he either accepts or declines.
My biggest fear is that, having done cost management for him, I know that he literally goes from one sub to the next based upon $0.05 increments. For example, the last flooring sub charged him $4.15, labor and materials, to install #2 oak, and finish with one coat of stain and two coats of poly. On the next house, a new sub offered him $4.10 and so we changed.
I want to develop several "specialties" that I can do for him and hopefully other area builders. I suspect that I would have to bid $4.00 to $4.05, labor and materials (#2 oak) to get the work. The question is, with a crew of three (one cutting, one laying out and one nailing down -- and then all three of us sanding, cleaning and stain/poly-ing), at what productivity rate could we make decent money.
ChrisA
It's really none of my business but if he switches subs over a nickel then you need to look some where for work. He sounds too tight. Tight is good. But that 's too much. Sorry to interupt your thread I just had to say it.
I agree but I already work for him. I've done this sort of work for 6 months now (after being in small business management for 10+ years) and I find it amazing that he has such a great reputation. I saw another thread essentially about salesmanship and a light clicked on in my head -- he is an OK builder but a terrific salesman. Clients absolutely love him even when things go wrong (its always a subs fault). Again, I really like him but I would never hire him to build a house for me. Yet, in some ways, I want to be like him. He started five years ago with absolutely no experience (he ran a restaurant), and now grosses about $2m per year (I do project accounting for him, so I know the real numbers).
I want to learn from him, but not get too ripped-off in the process.
ChrisA
I guess I didn't realize how on the ball you really are. I see your point now. It's really not a bad idea if he is that popular. I just get irked by people who hold a nickle over peoples head. I've been around a little of that and I don't like it. Good luck
Only you three know the answer to that last one. If my memory is right, the last one I did was about 900sf. Three of us did it int two days. Two very long hot days - that much I remember!Excellence is its own reward!
That's probably more up to you and what you want to make than anyone else. I would SWAG that with three competent guys going at it, you could lay 450-500 sf in a day. Say you do 500. At $4.05 thats $2025. Take your materials out. But if you're truly subs, now take out depreciation on your fixed assets, fuel, taxes, your own insurance, advertising . . . IMHO if he has competent employees who can do the work and wants you to become subs, he's a bonehead. Or he just doesn't want the headache anymore of paying your insurance, gassing your vehicle, matching taxes, etc.
can find it done here for two and two but more likely $2.50 + 2.50Excellence is its own reward!
I can't help ya with the hardwood pricing...but will tell my little story about subbing for a former employer......if Ditch will tell the secrets of hardwood pricing and whether he thinks that includes materials too.
I was laid off in Feb from a company I had about 10 months in with. At my layoff meeting, I was handed a set of bath prints to bid as a sub.
I had been on my own for 5 years prior to working for this company.....and I had kept up with my contractors insurance policy. To sub.....I needed proof of insurance......and am treated like any other sub.......get a call....give a price....sometime get the work....sometimes not. I set my own hours...and do the installs my own way. I do have to present a finished project that meets their high levels of finish...and I also have the benefit of knowing the owner can be insane with his levels of fit and finish...and change orders....and can somewhat price that into the job.
This arangement has also let to me customers that bought shell additions from the company...and were looking outside to trim and finish.....either to keep costs down....or to delay the finish to suit their budget.
As far as my buddy, the lead carp is concerned.....I'm the best sub. My prices are usually in line, my quality is above and beyond, I show up pretty much as promised...on time and sober.....and I work real well with the customers. I come to him with no suprises..and minimal attitude. And...as I know most of the guys still there......makes for a real easy going job site......we trade tools as needed..move each other's trucks to clear a path.......give each other a quick hand if a heavy or bulky item has to be moved.
I even took a drive with the lead last week to go help lift a long wall at another lead's job over lunch.....the OK was given for me to change order for an extra hour...but since these guys had helped me get my tile up to the bath when I started....I just called it even.
If you like the boss and like the guys that are left......it can make for a good situation. It can lead to a customer base you might not be able to reach so quickly on your own. But......it's still business. As much as I'll work with the owner...and as much as he loves my work.......it's still business..and still money changing hands. He's "tested" me a coupla times....like I said....I'm still just another sub. He's not dumb..and hasn't let any false loyality keep him from trying to find another sub that does similar work..but cheaper. I wouldn't be comfortable with filling my entire schedual with their jobs....gotta keep finding and working of new references to grow.
And I wouldn't do this as a fake sub. I charge enough to cover my new expenses...mainly health insurance...as that's one of the biggest monthly costs. If they laid me off from a $15/hr job and expected to pay $20 for sub work.....I'd go find a new employer....or find a company that's gonna be realistic about sub work.
Thru them.......it's all labor. They provide all materials......and I only accept that because I know my buddy the lead will make sure everything I need is there and ready. Otherwise the price would go up for that too.
If you've worked for yourself before.....it's a pretty easy switch....if not......be careful.....and if you can't figure the motivation....be extra careful......and either way...fully document and contract everything......nothing happend without a signature and a start check!
And progress doesn't happen without the contracted progress checks.
Jeff
.......Sometimes on the toll road of life.....a handful of change is good.......
You claim to install and finish floors in a professional like manner. Based on that, why would you want to subcontract at a rate less than the existing sub? Floor installers/finishers do not work on an hourly basis. We perform on a per foot basis, other than items like preparation. Tell your boss that you will contract the flooring jobs at a rate equal to his existing sub. If he just wants a better deal, you will know at that point, because you won't get the job. GW
We lay our own floors and sub the finish. We generally figure the cost at around $8/sf including materials. Our finisher charges between 1.75 and 2 depending on the difficulty of the job and the distance from home. His work is of the highest quality. Our labor cost to lay is between 1.50 and 3.00, again dependent on the difficulty and size of the job.
I think that your employer is trying to save money but he also may be giving you a break. We did this with one of our employees who had a small side business finishing floors. We eventually went back to our regular guy because of the superior quality of his work but our employee is still happily working for us. There was a little bitterness when we chose our regular finisher, but actually our employee was a little relieved not to have the responsibility for the completed job on his shoulders.
if he wants you all to start bidding on his jobs and act like a sub. (lets forego the IRS stuff) However later you mentioned that he will forego quality for a nickel. Examine those two statements. Logically i couldnt work for this guy. Especially in this trade where you have people who will bid to be the lowest bidder hopeing they will get the job.
Subs and GC are in BUSINESS, not out to do pro bono work. If youre going to be screwed by a nickel is it really worth the hassle to work for this guy as a sub?
I had another thought today.
What's your "speciality"? Most subs have one. If it's not hardwood.....the real hardwood guy will kill ya on time and price.
You have to give them a reason to pick you. You said you do what ever is asked.......which might not leave enough room to develop a speciality.
Mine was trim.......I was the go-to trim guy as an employee.....and did a good portion of their tile...and tile is what they've been calling me back for....but I'm now expending that to include as much trim as I can related to the tile job...and have been pricing in the bath vanities that sit on the tile and beside the trim......and am doing a full kitchen tile and cab install next
because they can't get a tile guy that does as nice a layout......or a cab sub that knows their goofy fancy installation ideas....or a trim guy that'll do it all...and very nicely......
So the point is.......offer something they can't get elsewhere.......do ya think hardwood will give ya that? Jeff
.......Sometimes on the toll road of life.....a handful of change is good.......
Jeff, that's a good point, and one that I have struggled with. One odd arrangement my boss has is that, becuase of his relatively large volume (large for him anyway) of 12 to 15 houses at any one time, he has an arrangement with a friend / sub-contractor to "manage" the houses from drywall to close. The builder oversees everything from lot selection, initial legal stuff, selling, financial to dywall, and then this guy takes over "overseeing" until close. This guys company, with about 6 employees, does tile, some hardwood, trim, some paint -- essentially eveything that the real specialty subs don't do. It's an odd arrangement, but this guy does really well and his employees (all college guys) are well cross-trained. I had actually thought about doing around 5 or so different things (central vac install, hardwood, ?, ?, ?). I am not certain where to go with it.
ChrisA
Chris,
Just my opinion. Concentrate on one market. I don't think anything is more frustrating (or exciting to some) than bouncing from one type of construction to the next. Attempting to wear 4 or 5 different hats can be difficult. Don't get me wrong, there are a few guys here that can do it all, and seem to be successful at it.
I grew up in the property management business and we had crews for everything from incidental repairs to total re-hab and everything in-between. Most of his life my Dad never knew what day it was. He was a jack-of-all-trades, but I don't think he ever really mastered just one, except for floor finishing.
I think that if you choose one trade, install and finish hardwood floors for instance, and learn everything you can know about the business, the market will keep you busy enough to dissuade you from looking any further.
It's impossible to put concrete numbers on the hardwood flooring business, no pun intended. I work alone. I average 300 sq.ft. a day on floor builds and 700 to 1000 sq. ft. a day sanding new floors. Although I have installed over 600 sq. ft. in a day when I was working in wide open spaces with nothing in my way. I have also spent an entire day installing less than 100 sq. ft. in closets and hallways. Old floors average about 400 to 700 sq. ft. a day sanding, depending on the difficulty of the job. I have never been on a job that I couldn't coat the entire floor in a day and still have time to wash the truck or mow the grass when I get home.
Hope this helps.Ditch
Ditch, thank you very much . . . great response. Right now, we don't have enough flooring work to stay busy 5 days a week; hence, our desire to do other things. But I well understand the arguments in favor of specializing.
ChrisA
Chris -
I'm with the other guys who are really suspicious of this situation.
Every guy I've known who has tried this is extremely cheap, and/or thinks his guys are just screwing around and not doing anything. He's trying to save himself money - He's in no way trying to help you out at all. He figures you'll either underbid the jobs to get work, or work a lot more hours and he won't have to pay overtime.
I think what he's doing is immoral and illegal, and I wouldn't stand for it. Atlanta is a big place - You shouldn't have trouble finding work.
Why is the person who invests your money called a broker?
I wouldn't be a hard on the guy as that.....well....almost not as hard!
Simply because I'm in a similar situation...being laid off when the company heads thought all sub was the way to go.....then the head who had that idea went....and now the guy that wanted to stay all in house is in charge...and keeps me subing because he likes my work.
I'd say...keep your eyes open....real wide open.....and see if you can work this to your advantage. I have...for the time being.
I've heard thru the grapevine that re-offering me my position has been mentioned..and wiser minds have guessed that I wouldn't say yes....so I'm just going along for the ride. Another theory from the inside is that the "company" doesn't like to admit mistakes...and they'd really never hire back a lay off or fired guy.
Either way....think it through...and see how you can make it work for you.
I agree...specialization has it's good sides.......and may offer more money.....also lower equip costs and such...but I'm one of those odd dudes that like to keep my hand in most everything.......and I think thru slow times...that'll keep my phone ringing.
Right now...the old company has an hourly sub.......a real, honest to goodness sub.....but he bounces around from site to site...focusing on one specific task...then another.
I'd love to go hourly...but I know the company isn't real happy with the arrangement...and he'll be the first call they stop making when things slow down.....plus...he's hourly because he's unsure how to bid.....and the only way to really learn is to bid and get burned a coupla times.....
If you're not forced intot the fire.....you'll never learn how to cover your a$$........and finding those builders that'll take a chance on an hourly sub will be few and far between.
I'll not specialize because I'm subing first because it was the quickest paycheck after being layed off.....but I'm now back to trying to grow my remodeling business.....and in remodeling.....I bid it turn key...and do as much myself as possible.....so just makes sense to me to sub the same way.........and stay up on things.
Jeff.......Sometimes on the toll road of life.....a handful of change is good.......
Ive been in similar circumstances and gave a price about 3-5% higher than the regular subs rate and got the job because they they knew me and my work.I have never priced to get the job always price what the jobs cost and what you think your worth otherwise you might as well get a job as an 'associate' at the big box and stay out of the rain.