Jacob Austin 00:00:17 Hi all! Jacob Austin here from QS.Zone. And welcome to episode 62 of the Subcontractors Blueprint, the show where subcontractors will learn how to ensure profitability, improve cash flow and grow their business. Today's episode, number 62, is going to be all about that familiar subject of day works. If you're new to the show, please subscribe for more user friendly advice on all things subcontracting. Now, I wanted to do today's episode on this particular subject, following a conversation that I had with one of the suppliers that I work with, and we were debating a load of charges that he'd made me for little bits of incidental work. And if you're not familiar with my work, which I'm sure almost everybody within the industry is doing work for exactly that incidental work, things that are not really sufficiently complex for them to be priced or of short duration. It isn't covered by one of your standard contract rates, nor by a lump sum or fixed price agreement. And instead, the contractor or subcontractor is paid based on time spent and materials used.
Jacob Austin 00:01:27 And it's typically that kind of stuff that's unpredictable, difficult to quantify at the start of the job or unforeseen things. Things such as opening up the work, little bits of repair and damage that you're making, good emergency items or bits of disjointed work that aren't really reflected of what you're drawing or scope shows. And now the debate that I was having was because the subcontractor was trying to charge me an amount for certain elements of prelims over and above being paid for two operatives and a machine, all on day wax and we were falling out about it. Because when you refer to what is the standard definition of de works, the items that he was then trying to charge me on top of should be included in the overall rate for his operatives, and there is a generally well known and well used definition of De works now that was produced by the Building Cost Information Service, which is part of the Rics. And unless somewhere written in your contract, there's a statement to say that the definition of de works is a different definition then the standard basis or Rics definition should apply.
Jacob Austin 00:02:41 And the sort of the premise of it is that if you're doing some incidental work and one man out of a gang of four has left the other guys to do their money making activities, whatever they are for the day, and this particular fella has started doing some day works. Then your day work rate should include for all of the costs that you have to pay out, plus your markup so that you still made as much money, or there or thereabouts, as if he was doing his measured work for the day. And let's say he spends two hours out of his day and he's finished and he gets back on with his money making activities, whatever they are. So during that time, arguably that has to pay for some of your supervision costs for being on site. It has to pay for that man's wage, whatever he takes home from you, and it has to cover all of the costs associated with that. Now there's a couple of approaches that are outlined in most subcontracts. One approach is a percentage addition to the flat rate of the six day work rate.
Jacob Austin 00:03:43 So the RICS or the BCIS regularly maintains and updates day work rates for unskilled labor all the way through to the likes of Master Craftsman. And this is published and available for you to download from the BCIS website and what it gives you is an accurate base rate that you would be expected to pay out, and it factors in the regular on costs of, say, your national insurance, your days of holiday, an allowance for sick pay, bank holidays and pension contributions. So it's basically the bare naked cost of employing that operative. So what the common custom is, is that you add a percentage to that, which then allow us for all of your other incidentals and your overhead and profit. And now there's quite a long list of what those incidentals are. So if you haven't read that document to understand what you're being asked to add on, then you could well be taking a guess, a stab in the dark, or lining yourself up for a loss for the sake of half an hour's reading and a bit of calculator time.
Jacob Austin 00:04:49 Because when you then later charge a day work rate, you're expected to charge what is written down in your subcontract. And all of these incidental elements are expected to be included in that rate. So, as I say, one common custom is for the flat rate of employing your operative to be included with a fairly significant percentage adjustment, which then covers for these incidental costs. And of course, your overhead and profit. Or the alternative to that is that you state one fixed rate, which you then may adjust at various points in line with your fixed price. But that fixed rate has to then include both of those parts together. Now I'm labouring a bit of a point here, but it's because this is really important because if you've got an operative and you're paying him, let's keep it really round a £200 a day and you've basically added to that a 25% uplift so that you make something on that hourly rate. Then every time you do a piece of work which attracts that day work rate, you're going to get paid 25% or £6.25, then you're going to take home in profit.
Jacob Austin 00:06:01 But the contractor, meanwhile, is expecting you for that 25% to be giving the benefit of head office charges, site staff, including any site supervision, any additional costs of bits of overtime, a contribution towards time lost for inclement weather, any additional cost of bonuses or incentive payments, things like apprentice study time or time spent training any subsistence, lodging and travel costs. So that means time spent travelling should be covered for within your day work rate. You also got sick pay or sick pay insurance, any third party insurance and employers liability insurance. Any sums that you accrue towards the likes of redundancy payments, employers national insurance contributions, tool allowances, costs for use and maintenance of any non-mechanical tools or hand tools. The use of any erected scaffolding, staging or access equipment. The use of any tarpaulins or sheeting the likes of your Hessian for protecting the work, all of your PPE task, lighting, safety and welfare facilities that you're providing as a subcontractor. The cost of your storage cabin, or any other liabilities that you're going to incur by employing that operative.
Jacob Austin 00:07:24 And then finally, your profit. So there's quite a long list of items that you have to provide all for within the fixed price of your day work. So it bears getting that day work amount right. And unless there is a specific statement to say that a particular different rate is applicable under your subcontract, which you can almost guarantee that there won't be, then that rate is what you're going to get paid, and it's not that rate. And then a separate amount for preliminaries costs, because those preliminaries costs are deemed to be covered by the day work rate. So part of what you need to do here is to digest that list and work out your typical costs of employing a person on your site, and how much they are going to have to contribute towards all of the on site running costs, because that is likely the biggest variable when it comes to that list. And what you have to consider as part of that is that your site supervisor and whoever else is going to be with him, whether you've got any accommodation and the likes, those are going to be constant time related costs.
Jacob Austin 00:08:32 And whilst you're doing your measured works or your main element of subcontract works, as each piece of work is completed, the cost that you're charging the contractor is covering your labour costs for doing that piece of work, as well as contributing towards those supervision or on costs. And that means that, say, if you've got 15 operatives on a particular site, then as those 15 operatives complete their work each day, then 1/15 of your site based overhead should be covered by each man. So then when you're putting your day work right together, you need to make sure that the day work rate that you're charging is more than enough to cover that same 1/15 as if the man was fully employed on your contracted works. Now, of course, your setup or your number of lads on site might differ at various points throughout the job. So this is where you need to do a bit of a balancing act, and you might have a think about what times within the job or during the course of that project are you most likely to need to charge day works, and how many lads would you expect to have on site at that time? Because that number will then affect how much supervision costs you've got to cover from the amount that each person on the site is earning.
Jacob Austin 00:09:50 And a regular mistake that I see a lot of subcontractors make is underestimating how much they need to add on to the rate to cover for those costs. And of course, the result of that is you can be working hard and not taking home the financial rewards that you deserve. So day work should cover all your costs, not just the obvious ones. Now, whilst we're talking about the subject of day works, let's just move on and talk a little bit about tracking day works. Since you're charging for actual hours worked and materials used, accurate record keeping is now critical, and the last thing that you want to do is get into a dispute with the contractor or the client, because your records don't match up. So keeping a detailed logbook of what was done, who's worked on it, and for how long doesn't particularly have to be fancy, but a simple template with time in, time out, and task completed could do the job, and this will serve as back up if there's any question about the hours worked.
Jacob Austin 00:10:51 Because that works can be seen as a bit of an unfair way for a subcontractor to try and top up. How much they're taking home if they're measured, works isn't paying enough, and the contractor has got lots of different resources that he can pull on to try and verify whether a day work claim is correct. They have price books and labor constants that give a fairly accurate guide as to how long various different tasks ought to be taking, and it's quite common for their works to be challenged for that reason. So having an overall record of what is being done each day by which operatives is going to stand you in good stead and help you to answer any inevitable questions, material receipts and invoices you want to hold on to and log every invoice, every receipt for materials used during day works. You might even want to take photos of materials being used for extra evidence. The more detailed your records, the easier it is for you to be able to justify your charges and make sure you take home the right amount of money.
Jacob Austin 00:11:58 Now, of course, the contractor always wants your day work sheets to be signed, but one thing that is really important to do is make sure you're getting them signed by the right person. It's no good finding Billy the Broom, who's one of the contractors laborers, and getting them to sign off your documents, because you'll probably sign anything you put in front of him, and their signature won't be worth a thing. So make sure you've identified the person managing your package and ideally discuss who's authorized at your pre start meeting to be able to sign off any potential day works as and when they might occur. This can of course save you a lot of hassle down the line over what's done and how much it costs. And of course it's not just hassle in terms of getting paid, but it can also turn into pounds and pence. A good idea before you embark on any day. Works is at the beginning of your shift, or perhaps at one of your breaks is to let the contractor know of what you need to do so that you've got their confirmation to proceed and allow them the chance to come and have a look at what you need to do so that they can get an appreciation, and they're able to come in and inspect it and sign off on how long it's taken.
Jacob Austin 00:13:09 Let's talk about some common pitfalls that subcontractors fall into when it comes to date works. First, as we mentioned earlier, underestimating your rates. We're not just thinking about labor. You need to account for all the little extras like travel time, consumables, PPE and equipment, wear and tear. Missing these costs means you're leaving money on the table. So before you firm up your rate, you need to think about whether what you're going to charge is going to cover enough. The second pitfall is poor documentation. If you're not tracking every hour worked and every material used, you could face issues when it's time to build your client or the contractor. If there's a dispute about your charges, you need to have detailed records to back you up. But the biggest mistake is not negotiating day work rates up front. Some contractors will shy away from doing that and say, oh, we don't really like day works, so we'll not include a rate and you'll need to price everything as and when it comes about. But then there's an inevitable problem of they need something doing on the quick, so they send you a site instruction to crack on with it.
Jacob Austin 00:14:19 And for those little incidental items, it's not always practical to come out and survey what needs to be done, work out a cost for it, and quote it before your operatives start. Otherwise, it's going to end up costing them a small fortune to cover your management time alone, never mind getting the work done. So it's always worth agreeing to a work rate in advance. And there you have it. A breakdown of day works and what makes up a day work rate whether it's labor, materials, overhead, profit, and all of those incidental costs that you need to factor in each element plays a crucial role that you need to consider to make sure you get paid fairly for the work that you do. My mission with this podcast is to help the million SME subcontractors working out there in our industry. If you've taken some value away from today's show, I'd love it if you'd share today's episode and pass that value on to somebody else who'd benefit from hearing it. And of course, subscribe yourself if you haven't already.
Jacob Austin 00:15:21 Thanks again for tuning in. If you like what you've heard and you want to learn more, please do find us at QS.Zone where you can subscribe to our training and support system for like minded subcontractors. In there you'll find templates, how to videos, interviews, and more. It's less than the price of your cup of coffee per day and you can cancel any time. We're also on all your favourite socials at @QS.Zone. Feel free to reach out, send me a message, or even tell me what you want to hear about as a subcontractor. Thanks again! I've been Jacob Austin and you've been awesome.
