Type to search

Industry Updates

7 Innovative Ways To Cut Construction Labor Costs


The construction industry is an industry beaming with profitability potential. However, high labor costs, high tax rates and unavoidable overhead costs can make profitability a challenging thing to achieve. 

The first step to increasing net revenue lies in cutting unnecessary costs. Cutting expenses in the construction industry is an uphill battle. The cost of labor alone can be exorbitant because lower-paid construction contractors are paid better than most average, entry-level employees in other sectors. 

To thrive in construction, you must think of innovative ways to cut construction and operating costs. Here are seven innovative strategies for doing just that.

Strategy No. 1: Go Digital

The construction industry is known for being stuck in the Stone Age when it comes to new technology. However, often, new technology could be the key to boosting that bottom line. 

From 3-D rendering software to high-caliber accounting software to digital communication platforms and more – there’s no shortage of innovative technology in the construction field. These technologies can help cut back on labor and operational costs significantly.

Strategy No. 2: Use New Building Techniques

Don’t be wary of adopting new building techniques. Just because you’ve always done something one way doesn’t mean it’s the most efficient or cost-effective. For instance, look into swapping out your standard framing for ICF techniques. 

While the materials in ICF construction might be more expensive upfront, the interlocking structural insulated panels often cut back on total build time and labor costs. ICF construction isn’t the only building technique worth considering. 

Research to make sure there aren’t newer techniques that can either cut back on costs with their materials or their labor.

Strategy No. 3: Invest in High-Quality Equipment and Tools

The upfront cost of high-quality equipment and tools can cause a bit of sticker shock. However, it’s crucial to think about lifetime value. Look over your equipment purchases for the last several years. 

Compare how much you spent on purchasing new, cheaper equipment. Then, check out high-quality models of the same equipment and see how long the warranties last. Compare the total you spent purchasing new equipment versus how much you would have paid had you just bought the high-quality equipment from the start. Often, higher quality equipment is cheaper in the long run.

Strategy No. 4: Prioritize Maintenance Over Upgrades

Once you commit to buying higher quality equipment, make machine maintenance a regular practice. Instead of buying new equipment as soon as something breaks down, hire someone to fix what’s broken. It’s cheaper to fix something than it is to replace it.  

Strategy No. 5: Shop Around for Cheaper Materials

Just because you have an ongoing relationship with a supplier doesn’t mean you’re getting the best deal. Shop around and compare prices on everything. From the lumbar you use to the polyiso insulation you purchase, check the prices on it all. You don’t always want to go with the cheapest option, but you want to make sure that you aren’t being overcharged.

Strategy No. 6: Study Employee Behavior and Adapt

Employee turnover, theft and stolen time are all things you have to confront when running a construction business. Dig in and understand what’s happening with your employees. 

If turnover rates are high, invest in employee retention. Work to understand why workers aren’t staying and adjust to keep them happy. Utilize digital time tracking or other technologies to cut back on stolen time, and implement a tool check-out program to reduce theft.

Strategy No. 7: Zero-In on The Small Things

The most significant thing you can do to decrease costs is to take a hard look at your profit and loss statements. Look at every expenditure line by line — zero-in on the areas where your company is hemorrhaging profit. Sometimes it’s things like recognizing that your company overspends petty cash. Other times it’s about realizing that not every project calls for heavy duty dampers. Take a hard look at where you’re overspending and make changes to improve.

Start Cutting Costs Today

These seven innovative strategies are just a few options for reducing labor and operating costs in your construction business. The reality is that high profits require innovative cost-cutting techniques. Start making changes to your construction company today, and you’ll be on your way towards achieving more profit in the future.

Matt Lee is the owner of the Innovative Building Materials blog and a content writer for the building materials industry.


You Might also Like