Keeping a framing crew on payroll versus staying all subs, when labor is the real constraint

Question

When a framing crew turns down two separate requests to work on one-off spec houses because the crew is already booked, and the builder waits five or six weeks for someone else both times, it points at a broader question worth thinking through. For a builder doing one or two spec houses a year, the standard answer is to sub everything. Pay per house, carry no payroll between jobs, and overhead stays close to the cost of a truck. That is clean. But labor is the binding constraint right now, not money and not permits. Contractor surveys keep showing figures like 94 percent of firms unable to fill positions. If that holds, the builder with several framers on W-2 controls their own schedule, and the builder without is standing in line behind everyone else. The cost of that control is paying those employees in a slow month when there is nothing to put them on. There isn't an obvious universal answer between the two models. It comes down to how much a builder values scheduling certainty against the cost of carrying idle payroll through the slow stretches.

jessreyes12 · Answer

Dumb question first, since I'd rather ask it here. When people say a crew is on payroll, does that mean the builder is also carrying workers comp and the insurance side of it, or is that separate? I've only ever seen the sub invoice, and I assume the sub's rate already has all that baked in, which would mean the payroll comparison isn't just wages against wages.

tashaford30 · Answer

Right, a sub's price includes their insurance, their tools, their overhead and their profit. That is why an hourly wage comparison always makes payroll look cheap on paper, and then it is not.

renee_dubois · Answer

On the maintenance side of small multifamily, the same tradeoff shows up in a different form. Payroll only works if the hours can be guaranteed at forty a week. The month they can't, the owner pays anyway, and that pressure tends to invent work that doesn't need doing. The honest test for a builder is whether there's twelve months of visible pipeline, not whether the wages can be covered this quarter.

aaron_fitz10 · Answer

What nobody's said yet is that the payroll option changes what business this is. Two houses a year with subs is a development business. Four framers on the books is a construction business that happens to develop, and those have different failure modes. Which one is worth being is the harder question underneath the labor question.

samantha_ruiz · Answer

Three houses in and I've been on the all-subs side the whole way, and the ceiling I keep hitting is exactly what cobalt describes. My last build lost 31 days between roof dry-in and rough-in because my electrician took a bigger job and I was fourth in his queue. I ran the numbers afterward. Those 31 days cost me a little over 9k in interest and taxes. Four framers on payroll wouldn't have fixed the electrician anyway, which is the part that keeps me from switching. The scarce trade in my market isn't framing. If I ever put people on the books it'll be whichever trade is stopping me that year, and that trade moves.

paulgrant17 · Answer

Keystone's point about the scarce trade moving seems like the whole answer. You'd be hiring for last year's bottleneck.

Keeping a framing crew on payroll versus staying all subs, when labor is the real constraint

6 replies