Annual Labor Rates Increase Reminder

February 17, 2024 by
Annual Labor Rates Increase Reminder
True32 Corporation, Bobbo Buckley
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I'm creating this blog post on my Custom Cabinet Estimator website, so that is where it will live, but this topic applies to ALL Cabinet Manufacturers, not just those using Custom Cabinet Estimator. For as long as I can remember, I updated my Labor Rates in Custom Cabinet Estimator between Christmas and the New Year, the objective being to increase my labor rates based on the past year's inflation rate, which enabled me to give my team members an annual pay raise (ideally you would have received this message between Christmas and New Year, and I apologize for not getting this done then).

Some team member raises might be for more than the actual percentage of inflation (merit raise), but the primary objective was to offset inflation with a bigger paycheck for all team members. For all those who are Custom Cabinet Estimator users, I have created a mirror database in Notion for each of the CCE databases and have a link to those databases on the Customer Page of this website (in the Resources group). These pages are meant as a Do-It-Yourself tool for CCE users to update their pricing as vendors update their pricing.

My primary objective in creating these pages was to make updating CCE as easy as possible (each database is structured and sorted like CCE, so you can go down the list and update your pricing as needed). A secondary objective was that CCE users might update their pricing if it was easier to do. With any estimating system, it is essential that we keep our costs up to date, which leads to what I want to talk about today.

An effective estimating system should transmute out costs into our selling price, just like the Alchemist dreams of transmuting base metals into gold. If the cost of your sheet goods increases or decreases, you should be able to go into your estimating system and change that number, and the result should be that all future estimates and proposals should use the new higher or lower cost in calculating your selling price. This is why linear footage, square footage, cubit footage, and all the many variations on these pricing systems are not effective (you never know how much to adjust your linear, square, or cubit footage pricing to reflect a change in your cost).

I think that the relationship between cost and selling price of things like sheet goods, hinges, drawer guides, etc., makes perfect sense to almost everyone, but when we start getting into labor rates, it gets a little harder to see the relationship clearly. Sometimes we can't see the forest for the trees. I hope that Custom Cabinet Estimator not only makes the first scenario clear, but also allows users to see the forest despite the trees when it comes to labor rates, so let's all take the time required to update our labor rates so our selling price will support giving our team a raise that will offset the erosion in their take-home pay caused by inflation.

If you are NOT a CCE user, this next part might not be of interest to you, so feel free to go about your day. While updating the Labor Rates in CCE last year, I thought it would be beneficial to leave ourselves a breadcrumb trail of what our Labor Rates used to be, so I edited the Description field slightly, leaving the old rate below. This year I decided to completely reword the Description to make it as clear as possible what has changed, and by how much. The new description looks like this for Base Cabinet Shop Labor:

Updated: 01/31/2024 - $28.50 (3%)
Based on a loaded labor rate of $57.13 ($0.95 per minute), and a Base Cabinet taking 30 minutes to assemble and hardware. Machining Parts Labor is included in sheet goods cost.

Updated: 01/06/2023 - $27.60 (6%)
Based on a loaded labor rate of $55.47 ($0.92 per minute), and a Base Cabinet taking 30 minutes to assemble and hardware. Machining Parts Labor is included in sheet goods cost.

Updated: 04/07/2022 - $26.10 

For clarification, since I do get the question from time to time, as to what I mean by "loaded labor rate". A loaded labor rate is all your annual labor costs (e.g., payroll, payroll taxes, benefits, etc.), divided by the annual total hours paid. The objective is to include all costs associated with working a team member in your hourly rate.

So, this year, as you update your Labor Rates, I suggest you also update your Description to match the format above (if you always use the rates I provide, then just copy and paste the description in Notion into your copy of CCE). Something else that I did to help me remember to update my labor rates was I created a Calendar event on my favorite calendar app (Google Calendar) with a couple of reminders set to nag me about it several times before the week between Christmas and New Year.

It seems appropriate to quote a famous shoe brand right about now.

"Just Do It!
Annual Labor Rates Increase Reminder
True32 Corporation, Bobbo Buckley February 17, 2024
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