Labour Cost Overruns: How to Catch Them Weekly

Catch labour cost overruns weekly by comparing paid and accrued labour with budgeted hours, rates and completed work. Investigate the variance before payroll closes, then update the forecast while there is still time to act.

Why weekly checks matter

A labour overrun rarely arrives as one big surprise. It grows through small misses.

The crew starts half an hour early. Overtime becomes normal. An apprentice is coded as a tradesperson. Travel or site allowances were left out of the estimate. Ten workers spend Friday fixing work completed on Tuesday.

Wait until month end and the detail is harder to recover. Supervisors have moved on. Timesheets have been approved. Payroll has posted the cost. The job might also be another four weeks further down the track.

A weekly review lines up three things:

1. What you expected to spend.
2. What payroll says you have spent or owe.
3. What the crew actually completed.

For more on setting up labour, plant and material reporting together, see the job costing guide.

Start with the true hourly labour cost

The base hourly rate is not the job cost. Your labour budget may also need to cover:

• overtime and penalty rates
• allowances required by an award or enterprise agreement
• superannuation where applicable
• annual leave, personal leave and leave loading for permanent employees
• workers compensation premiums
• payroll tax if your business is liable
• portable long service leave or redundancy fund costs where applicable
• site-specific travel, fares, tools or productivity allowances

Do not apply one flat loading to everyone without checking it. Super is calculated on ordinary time earnings, which is not always the same as gross wages. Payroll tax and workers compensation rules vary by state, worker type and payment type.

Use these fixed checks as at September 2026:

• The Superannuation Guarantee rate is 12% of ordinary time earnings, as at September 2026.
• Maximum weekly ordinary hours under the National Employment Standards are 38 hours for a full-time employee, plus reasonable additional hours, as at September 2026.
• An award-covered casual under the Building and Construction General On-site Award 2020 generally receives a 25% casual loading, as at September 2026.
• Employee time and wages records generally need to be kept for 7 years, and a pay slip must be issued within 1 working day of payday, as at September 2026.

Current award rates, classifications and allowances still need to be checked against the relevant pay guide or enterprise agreement. Once those inputs are confirmed, use the labour pricing calculator to test the charge-out rate and expected margin.

Compare hours, rates and completed work

Looking only at total dollars can send you down the wrong path. Split the variance into three parts.

Hours variance

This shows whether the job used more or fewer hours than allowed for the work completed.

Hours variance = actual hours - budget hours for completed work

If 400 hours were allowed for the completed work and the crew used 450, the job is 50 hours over. That is a productivity problem, even if the hourly pay rate is correct.

Rate variance

This compares the actual average cost per hour with the budgeted cost per hour.

Rate variance = actual average hourly cost - budget average hourly cost

A rate variance can come from overtime, a different crew mix, allowances, incorrect classifications or a budget built from old rates.

Progress variance

This checks whether the claimed percentage complete matches what is physically installed.

A supervisor saying the task is 80% complete does not help if the measure is just a feeling. Use quantities where possible. That could be metres of pipe installed, square metres formed, tonnes fixed or rooms completed.

A practical weekly warning table

The triggers below are management settings, not legal thresholds. Adjust them for the size and risk of each job.

Weekly signal	Calculation	Starting trigger	What to check first
Labour hours variance	Actual hours compared with earned hours	More than 5% over	Productivity, rework and waiting time
Average cost per hour	Actual labour cost divided by actual hours	More than 3% above budget	Overtime, allowances and crew mix
Overtime share	Overtime hours divided by total hours	2 percentage points above plan	Programme pressure and poor sequencing
Uncoded labour	Hours without a valid job and cost code	More than 1% of weekly hours	Timesheet setup and supervisor approval
Output per hour	Installed quantity divided by labour hours	10% below plan for 2 weeks	Access, materials, supervision and estimate assumptions

A smaller job may need tighter dollar triggers because one bad week can consume its margin. A large job may need separate checks by stage, crew and cost code.

Run the check before payroll is final

A useful rhythm is simple.

1. Close timesheets at the same time each week

Set a clear cut-off. Missing timesheets should appear on an exception list, not quietly roll into next week.

2. Validate job and cost codes

Every paid hour should have a home. Separate productive work, rework, variations, wet weather, training, travel and idle time where those categories matter to the contract.

Do not dump uncertain hours into a general labour code. That hides the cause of the overrun.

3. Accrue unprocessed labour

Your job report needs the cost incurred, not only the payroll already posted to the ledger. Include approved hours that have not yet reached payroll. Otherwise, the report can look healthy simply because of timing.

4. Compare actual hours with earned hours

Budget hours are not automatically earned hours. If a task has a 1,000-hour budget and is genuinely 40% complete, it has earned 400 hours. Spending 500 hours means it is 100 hours over at that point.

5. Split price from productivity

Ask two separate questions:

• Did we pay more per hour than planned?
• Did the work take more hours than planned?

The fix depends on the answer. A crew mix problem is different from late materials or repeated rework.

6. Confirm the cause with the supervisor

Keep this conversation practical. Ask what happened, which cost code was affected and whether it will happen again next week.

Useful cause codes include access delay, drawing issue, material shortage, breakdown, rework, variation and estimate miss. Keep the list short enough that people use it.

7. Update the forecast immediately

Do not leave a known overrun sitting only in the variance column. If the remaining work will continue at the new rate, update the forecast cost to complete.

Forecast final labour cost = actual cost to date + forecast cost of remaining work

Watch payroll details that distort job reports

Several payroll issues can make a job look better or worse than it is.

Overtime may be charged to the job that happened to be worked late, even though delays started elsewhere. Allowances may sit in an overhead account instead of following the employee to the job. Leave can be charged directly to projects when it belongs in an employment cost pool. Reversed or corrected timesheets can also land in a later reporting week.

Check gross wages, employer on-costs, accruals and cost-code movements. Reconcile total labour in job costing back to payroll and the general ledger. The totals should agree after allowing for documented timing differences.

The aim is not a perfect report three weeks late. It is a reliable weekly view that lets the site team correct hours, remove blockers and protect the remaining labour budget.