Keep a framing crew on payroll or stay all subs, when almost nobody can fill positions

Question

Twice this year I've been asked to frame for builders doing one-off spec houses, and my crew is small. Both times I said no because my guys were booked, and both times the builder waited five or six weeks for somebody else. That got me thinking about the other side of it.

If you're building one or two spec houses a year, the standard answer is you sub everything. You pay per house, you carry no payroll between jobs, and your overhead is basically your truck. That's clean.

But labor is the constraint right now, not money and not permits. The contractor surveys keep saying something like 94 percent of firms can't fill positions. If that's true and it stays true, the builder who has four framers on W-2 controls his own schedule and the builder who doesn't is standing in line. The cost is you're paying those four people in February when the ground is frozen and you have nothing to put them on.

I genuinely don't know which side I'd land on if I were building instead of subbing. Curious what the people actually building think.

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

Compass, yes, the sub's price includes his insurance, his tools, his overhead and his profit. That's why an hourly wage comparison always makes payroll look cheap and then it isn't.

renee_dubois · Answer

I don't build ground-up, I own small multifamily, so I only see a version of this on the maintenance side. What I learned there is that payroll only works if you can guarantee the person forty hours. The month I couldn't, I paid anyway and I resented it, and the resentment made me invent work that didn't need doing. Cobalt, the honest test for a builder is whether you have twelve months of visible pipeline, not whether you can afford the wages this quarter.

aaron_fitz10 · Answer

What nobody's said yet is that the payroll option changes what business you're in. 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. I'm still working out which one I'd even want.

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.

Keep a framing crew on payroll or stay all subs, when almost nobody can fill positions

6 replies