Subs Or Employees?

Mud Master

I was talking to a buddy of mine today, residential drywaller. He said he was getting killed by guys who are using subs, as opposed to employees as his overhead was MUCH higher than thiers. I use him as a sub to hang my smaller homes, and other projects that I don't have time to get to, but I pay him alot better than the majority of the guys are getting, most of them spanish.

Than I got home and low and behold this month's issue of REMODELING magazine's cover story is SUBS OR EMPLOYEES? with some very interesting comparison's,pro's and con's,thoughts and ideas about the issue.

So what about you? What do you prefer and why? Any reason's why one is more favorable than the other?? If you do sub, how hard is it to find a crew that will meet your standards?

Personally I prefer my employees. They know my way and how I want things done, they are there everyday in case there is a problem. My overhead may be higher than the guy that sub's, but having my own crew that knows what needs to be done, can read prints and deal with the GC is worth it. Besides when your doing the type of work I do, the GC's don't want to deal with a crew that doesn't know what else is going on around the site, or one that is only there for a few days to complete a portion of the job. I do use my friend(the one I was talking about above), but I worked with him for 6 years, and he is a great hanger and an amazing finisher. He has a small crew of 3 but they can bang out some walls, and I know that his level of excellence is right up there with mine, So in that situation, using a sub is a pro.

What about you..........

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George Z

If subs are really subs with normal overhead there should be
no real difference in cost between using subs or employees.
When paying employees as subs, that's a problem.
Strictly employees for us, except for services we don't offer in house.

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Mud Master

No what I mean is other drywall contractors using subs to hang the houses out, as opposed to having guys of his own. It's becoming more and more common around here.

A contractor with employees to pay and workers comp,insurance etc...comes in at $48.00/board.

A contractor who uses subs dosen't have worker's comp.,his insurance is lower, and his is paying a spanish crew $7.00/board to hang out. So he is only charging $25.00-$30.00/board.

See the difference?

I asked him why he dosen't pay his guys by the board and he says because they deserve to make a decent living without having to kill themselves.

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dirt diggler

how so ???

win4win

I know many who prefer subs because.....

No problems advertising to find employees.

No worrying about the application and interview process.

No hiring procedure hoops to jump through.

No timesheet, benefits and payroll hassles.

No worrying about keeping steady work for every employee.

No worrying about who is calling in sick, drunk, who has developed a drug habit, who is stealing from them, whose car broke down etc.

No worrying about providing and/or maintaining tools and equipment.

Less insurance responsibility.

No worrying about finding employees who will travel for jobs.

Less paperwork and office staff requirements.

MKamis

What part of Spain are these guys from? Not a lot of Spanish drywall hangers around here...

George Z

If a sub is insured, licenced and their employees have workers comp.
If a sub is running a legitimate business, they have their own
overhead expenses you are paying for.

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dirt diggler

i know this George -


but -- why does it cost me the same to have employees as it does to use subs

(this is what you originally were saying) ...

boman47k

Looks like the biggest difference is in labor charge. Someone has to pay the sub's fixed overhead for any particular project and the regular markups, right?

George Z

Would you not want your margins to be the same
If you need 40 or 50% gross profit, does it matter how you got that?
Employees or subs?

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Ed the Roofer

Subs can be much cheaper to use, because you have no control over how that company pays their "employees". More than likely, they are not paying the work comp on their guys and treating them as 1099 day laborers though. If an injury does happen and they are not covered by their "employer", guess who the employer winds up being disignated as.

Best pros for using subs are fixed job costing for labor and no need to find fill in work to keep them busy whaen you are slow.

Best reason for well trained and paid dedicated employees, is the higher quality expected by the owner on every job and consistency from one job to the next.

Ed

George Z

Exactly!
If you compare apples to apples:
Well paid, fully insured employees
vs properly ran sub business with well paid insured employees.

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Mud Master

And you are right...HOWEVER

More and more I see guys subing illegals, or foriegners. They get paid lower, so the guy using them comes in lower, hence lowballin' the guys that run legitamate businesses. Now, these guys may not last to long, they may get caught, thier quality of work may be so bad that no one will want to use them...but for everyone that goes under, it seems there are two coming after them.

Unfortunatly it's not all properly ran sub businesses out there, and alot of properly ran, employee based companies are feeling the heat. And if a guy wants to use a properly ran sub, he then feels the heat because thier price is higher, there for by the time he adds in his own price to the bid, he is high on the job.

It's not so much the legitimate businesses causing the problem. It is the ones that are not.

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George Z

Then the issue is not subs vs employees
The issue is good contractor vs bad.

You could bid against "contractors" using employees at minimum wage
that are not insured. Same issues.

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Mud Master

No it's not. They still have more overhead than a contractor subing the work out. They still have worker's comp, they still have higher insurance, and 5 guys @ 40 hours @ $5.15 is still more than putting a few subs on a job for a day or two

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George Z

Example:

Job is $10,000


Scenario 1, Employees
Direct costs: materials, cheap labor and burden(including Workers comp) $5,000
Gross profit $5,000

Scenario 2, Subs:

Direct costs: Subcontractor, his profit cheap labour and materials $5,000
Gross profit $5,000

Student painters have insured employees, they pay them slave wages and are as cheap as it gets.

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Mud Master

But the question is not thier bottom line, it's how they price it. If the employer comes in @ $5,000.00. Chances are the sub using "cheap" labor or illegals will be @ $2,500.00-$3,000.00 or in some extreme cases, even lower.

Some "businessmen" don't charge for a future, they charge for beer money, using illegal or god awfully low subs. Which in turn, hurts us, the legitimate contractors.

Most people use subs because it makes a greater profit than using employee's. I cannot see how they would come in the same when the contractor using subs has at least 50% less overhead

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joasis

I use my own crews unless we absolutely cannot work it in, like having other job sites going. The rate I just heard in OKC is down to $7.50 a board, taped and textured. I know I wouldn't be doing it for that, but oh well.....I cannot say I would hire those crews, since I have seen a lot of poor quality jobs on the tract homes when we go tour them on Sunday afternoons...seeing what other builders are doing.

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Mud Master

Maybe where you are the playing field is alot more even. Not here.

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Ed the Roofer

This sub versus employee issue is not new to the construction industry. Neither is the fact that when one drops out, two others appear. (Not correct statistically, but just getting a point across.)

Good economy, an employee sees the big dollars coming in and wants to get a piece of the action. He start up his own business and he either finds out the true cost of doing business and charges correctly for it or he determines that it wasn't so bad having a guaranteed weekly paycheck and enjoy going home after he puts in his 8/40.

Bad economy, an employer does not have enough work to keep the employees going full time. If he was making $ 15.00 per hour from the employer, he thinks that working only 20 hours per week at a $ 30.00 per hour charge equals out. He either learns or goes out of business. Then the cycle repeats itself.

A $ 5.15 or whatever per hour guy may be perfectly capable of doing just as good or even better than a $ 30.00 per hour employee.

It seems to be a reality that the illegal Hispanic and Polish workers do work very hard for their money. It is the employers out there always trying to find ways to cut corners and costs to earn business rather than build a better paid higher quality dedicated in house staff of well trained employees that continually create and perpetuate this low ball cycle.

Also, for those employers who turn a blind eye to the payroll and insurance structure of their subs, it may come back to bite you in the azz someday when you can least afford it.

Ed