MINIMUM HOURLY RATE FOR A SOLE TRADER
Determine a minimum hourly rate for a sole trader operating in the local area, performing a combination of service work and small installation jobs. The rate is developed to allow for low sales of materials.
For this example, it is assumed that the contractor operates the business from home, and has no unnecessary overhead commitments. It is assumed that the contractor is able to achieve a productivity that allows 30 hours per week as chargeable work, with the remaining 8 hours lost on non chargeable tasks such as travelling, preparing quotes, bookwork, etc.
On costs are assumed to be 38%.
The contractor has chosen to aim for a wage of $35.00 per hour.
Labour cost per hour = $35.00
Overheads are as follows
Van = $15,000.00 per annum (includes all running, insurances and depreciation)
Telephones (mobile and land line) = $3,000.00 per annum
Insurances (public liability, fire, theft) = $2,000.00 per annum
Accountancy fees = $1,500.00 per annum
Advertising, petty cash, entertaining, etc = $100.00 per week
Tool replacement = $1,500.00 per annum
Option 1
For the sole contractor detailed on the previous page, determine the minimum charge out rate that is required if the contractor employs an apprentice. The apprentice contributes 37.4 working weeks (allowing for attendance at TAFE), with 36 hours per week. For simplicity, the charge out rate is based on the contractors wage rate of $35.00 per hour, with 38% on costs. Would this adjusted minimum charge out rate make the contractor more viable in the market, assuming that he can produce enough work to keep the apprentice fully occupied?
Option 2
What effect on minimum charge rate would occur if the contractor provides a van for the apprentice to use on a full time basis? (Allow $15000 for annual costs for the van)