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Builder counteracts costs of government legislation by employing subcontractors.

Builder counteracts costs of government legislation by employing subcontractors

Like any industry, the bottom line for construction companies is often adversely affected by government initiatives.

Recently, government has been active with legislation such as the Employers' Health Tax and Workers' Compensation Act reform.

However, while some companies may take the attitude that taxes are inevitable, others do something about it.

Ed Gilbert, president of Quality Homes Inc. in Thunder Bay, says changes in things such as workers' compensation have a drastic effect on his company.

Gilbert believes the way workers' compensation is assessed doesn't accurately reflect the risk element in some workplaces.

"They (the board) don't differentiate between office personnel, who are not subject to risk on the job, and the fellows we have working for us who are climbing ladders and putting on shingles, etc.," he explains.

Partly because of that, Quality Homes has changed its method of operation.

"We reduced our field workforce because employees in the field became too expensive with the Employers' Health Tax and increases in workers' compensation rates - all those types of employee overhead items," says Gilbert. "We have eliminated most of our field personnel."

The actual building for Quality Homes is now done by subcontractors, who pay the workers' compensation and other such expenses.

The changes will result in fairly substantial savings, Gilbert notes.

"Our risk level drops when we subcontract and work out a firm price, as opposed to using our own employees. So we save $14,000 a year in that particular area."

In addition, Gilbert notes that the firm will save about $6,000 per year in health tax payments by going to contract labor.

The legislation made operational changes necessary, says Gilbert.

"We had to change because our profit margin was such that we can't absorb all those costs. We had to take some steps to eliminate those costs, or find some other way of recapturing it."

Quality Homes has now taken on more of a management function than that of a general contractor. The bulk of the company's salaries go to office personnel, not those working in the field.

As for pay equity, another recent government initiative, Gilbert said it hasn't affected his company yet.

Even if it does, he believes pay equity won't be relevant to his company because the industry determines pay by job function, regardless of who is doing the work.

Andre Vigneault, president of Grand Homes Inc. in Sudbury, agrees.

"Pay equity has not been a major issue from the construction company standpoint because the trades are pretty well delineated," he says.

"If you're hiring someone as a carpenter's helper, you're paying them that wage rate."

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Article Details
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Title Annotation:Construction Report; Quality Homes Inc.
Author:Bickford, Paul
Publication:Northern Ontario Business
Date:May 1, 1990
Previous Article:Year's construction total boosted by three projects.
Next Article:Home prices increasing across Northern Ontario.

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