Plumbing bills explained to public

Press, 14 May 1987, Page 15

Plumbing bills explained to public

When an essential appliance or service fails, you experience some degree of inconvenience. Also, you’re faced with the grudging acceptance of a repair bill. If the bill comes to more than you expected to pay, you’re inclined to “see red.” This is when you accuse the tradesperson of being a rip-off merchant.

Fair enough, says the Plumbing Information Bureau, if the charge is significantly more than others offering the same service, but not if the bill honestly reflects the cost to the business of providing the service.

Knowing how tradespeople cost out their work and knowing what to expect can relieve a lot of the aggravation, suggests the Plumbing Information Bureau.

People commonly balk when learning of the plumber’s hourly charge-out-rate. In the North Island it averages around $24, and in the South Island, it is a couple of dollars less. Some quick mental arithmetic is often

done, like 40 hours x 24 gives a weekly income of $960 and annual earnings of just under $50,000. No wonder they can afford fancy cars and overseas trips you mutter.

This arithmetic is too simplistic to be true, like many things. Think on a moment or two. To arrive at your home equipped to do repairs the plumber/ gasfitter needs tools, well maintained ones, and secondly he needs to transport them and himself to your home. The cost of providing tools and a vehicle are part of the plumber’s overhead costs.

An hourly charge-out rate is calculated by each business according to the costs of that business. It consists of a labour cost, an overhead cost and a profit margin. The formula usually starts with an actual hourly labour rate (based on the award rate plus allowances). Next the non-productive time must be accounted ,for in the formula. This covers annual and statutory holidays and sick time amounting to six weeks. Thus the self-em-

ployed person is only earning for 46 weeks in -the year. Then there is a percentage of non-charge-able time that creeps into the week, such as time spent at the garage sorting out a mechanical problem with the van, or doing the banking, or costing future jobs. Combined on an annual basis, these factors give the labour cost component of the charge-out rate. Overheads are a major cost to any business. For a plumbing business they include: A.C.C. payments, administration and office

expenses, rent and rates on workshop and office power and light, insurance, maintenance and replacement of plant and tools, vehicle expenses, depreciation, plus more. The total annual cost of overheads must be included in the charge-out rate. Some traders have a separate charge for transport (mileage), based on so many cents per kilometre. If that is the case, then overhead costs incurred in providing transport (petrol, relicenslng, insurance, and deprecia-

tion), are not included or are reduced in the overhead cost calculation. Finally, to the total of labour and overhead costs, a profit margin of around 10 per cent is „ added. . All of this adds up to a charge-out rate which seems high’to you. and certainly is in excess of what the plumber himself receives for his labour. . But is the cost per hour of productive time required by that business to operate. Any less for a sustained period and that business will not survive.