I was challenged by a friend this morning, who didn’t agree with the main point of my argument presented in: “cheaper is ok right”
The reason he challenged me was that, in his mind the amount of money that someone is paid, doesn’t determine whether the job is a good job, or a bad job.
He is 100% correct.
So I wanted to make some clarifying statements, and reply with few challenges of my own.
The main point
The main point of my previous article, was that it costs a lot of money to do a job properly. If I am happy doing dodgy work, I might be able to charge $50 per hour. But that would mean that I take no responsibility for my work, provide no assurances of my work, no receipts, insurances or warranties. That is a huge gamble for a client, and most don’t understand why.
Fair Trading did a survey, and you can find it at:
Licensing_research_community_survey_full_report_2013.pdf (full report)
If the links become broken, please search for the individual documents through your search engine.
So… Let me explain why.
Every single job that I do, comes with a receipt that is logged and provided through my accounting software. Every single job is therefore 100% accountable, traceable and auditable.
As it is registered income, I will have to pay the required GST (Goods and Services Tax), and Income Tax. Paying those taxes immediately reduce the money my business receives by about 40% – in a round-about way at least.
Most cheaper jobs DON’T come with a receipt – and this is a huge gamble for clients. Why?
Receipts are essential!
Not providing a receipt is
- Every single job requires a receipt – no matter how small. This is Law within all States and Territories of Australia.
- If the trades person hasn’t provided a receipt, it is likely that it is a “black market” job. They won’t declare their income, they won’t be paying GST (Goods and Services Tax). You will pay more tax, so that they don’t have to. You might get a cheaper job in the short term, but you might pay a lot more later.
- You get NO workmanship warranty
- Under Australian law, work by trades people must comply with Australian Standards. In NSW (with similar rules in other states and territories), Fair Trading dictates that trades people are required to repair minor defects that occur within 2 years, and major defects that occur within 6 years of installation. If you don’t get a receipt, you have no warranties at all.
- You get NO parts warranty
- If your trades person has installed equipment, and they have purchased that equipment, you will have no warranty on any of the parts that they have installed. The light fittings they bought and installed are valueless should one or more of them fail – you cannot make a warranty claim without a receipt.
- If you purchased the light fitting (or any other part or appliance) and had an electrician install it for you, if it fails and you don’t have a receipt, your warranty may be void as you cannot verify that the light fitting was installed by an electrician, nor the date of installation.
- If an appliance you purchased fails, your manufacturer may ask for information about the installer. When was it installed, and by whom. No receipt might result in no warranty for your $1000 oven. If the installation didn’t comply with Australian Standards, or was non-compliant, your warranty may be VOID.
- If there is a fault, you might not be able to get the trades person to come back.
- If the power point they installed stops working, will you be able to get the trades person to return. If the pipe starts leaking in the wall, who will take responsibility for the damage. NO receipt, no insurance, no responsibility and no way to legally fight the contractor.
- Help from Fair Trading – If the trades person won’t come back, you have the option to report them to Fair Trading.
- Following on from item 4 above, if the trades person doesn’t come back to fix their fault, you have the ability to take the matter up with Fair Trading. Fair Trading can act on your behalf, and assist in the resolution of the matter.
- If you don’t have a receipt, Fair Trading may not be able to act on your behalf, you will be liable for the repairs. You will have paid for the initial work, and now the repair – you therefore pay twice.
- In the event of a fault, and house damage, your home insurance may be void (read your product disclosure statement – pds)
- There are lots of clauses within your home insurance policy. These dictate what you can or can’t do, should or shouldn’t do. There are clauses within those policies that specify that work must be done using licensed trades people – and to Australian Standards. If there is an accident, and a question about the quality of work done, your insurance company may just deny your claim. If you don’t have a receipt, you have no ability to prove that the work was done by a trades person. No Receipt, no insurance.
What are some other unseen business costs
Compliance certificates, test results, record keeping – time costs
When I fill out and submit my Compliance Certificate of Electrical Work (CCEW), it takes a fair amount of time. I am then required to store all of that related material for 7 years. This is part of my mandatory compliance requirements as an electrician.
It is also mandatory that I keep records of various work and testing that I undertake, also for 7 years. This may be Portable Appliance Testing (PAT), repairs or details of installations, or some other documentation. Preparing those documents, storage and maintenance also takes time and costs money. As I am required by law to do this, the associated costs must be passed on to my clients.
For insurance purposes, and sometimes for submission to the Supply Authority, I will often take photos and keep records of work done. The photos may show hidden components or work, or before and after repairs. I generally provide these to my clients for their documentation.
Supplying photos to the Supply Authority with a CCEW reduces the interference imposed on clients during their inspections and testing. It may cost a small amount of money in the short term, but it saves you time and money in the long run.
What client wants an inspector crawling under their floor or ceiling for 30 minutes, and pulling apart their appliances, when a photo presents just as good a picture.
Sometimes this might be half an hour, sometimes it might be one hour or more. It depends on what is being requested, and what I am required to provide the client. I might need to document problems for future reference to protect both my client and/or myself.
Other trades have similar requirements, and most of what I have written above is mandatory. Someone who does a cheap job, WON’T to go to this extent, because they wouldn’t be able to make any money.
As an aside, according to the Master Electrician’s Association, only about 1-2% of MANDATORY CCEWs are being submitted to the Supply Authority for inspection. This means that most jobs in NSW are ILLEGAL and therefore potentially DANGEROUS!
Running a business costs money
Time and vehicle costs.
Every quote I do, every visit to my supplier, every visit to a client, costs me money. Those costs must be passed on indirectly to my clients. If I don’t pass on those costs, I will soon go broke.
Equipment and maintenance costs
As mentioned in my last article, I have a substantial amount of equipment to undertake my job correctly. Some of this is very expensive to purchase, some of it requires regular maintenance, and some requires regular replacement – this is extremely expensive.
If I don’t charge enough to cover the cost of these expenses, I would have to cut corners and not do my job properly. The work would therefore not comply with Australian Standards and be illegal. This would put you and your family at risk.
Electricity, phone, internet, and consultants
Like every other business, I have to pay for utilities. Electricity, phone, internet etc. Sometimes I have to pay for consultants to undertake analyses. Sometimes I have to spend hours chasing up parts to suit specific equipment. This all comes at a cost, and that cost must be passed on.
If I don’t cover all of my costs effectively, I would have to cut corners to be able make enough money. I would not be able to entirely fulfill my legal obligations. I would therefore have to do substandard, quick and cheap work.
I don’t do substandard work – ever!
If I were to do substandard work, my public liability insurance would be VOID. If an accident were to occur, there would be NO protection for you, your family, or your home!!!
So… Coming back to my friend’s challenge.
Yes I agree, I could do a cheaper job and still comply with my legal requirements, but I would not be in business for very long if I did so! I would not be able to cover my costs.
This is why a significant number of businesses run by trades people FAIL!…
and yes, you can check the statistics for yourself!
Those that do manage to keep charging lower hourly rates (at least in the restricted trades – electrical, plumbing etc.) – DO ILLEGAL WORK.
My work is always of the highest quality, and more importantly
MY WORK IS ALWAYS LEGAL!
I hope that this article clarifies things a little.
Bye for now,
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#Charges #Costs #Electrician #FairTrading #Compliance #safety #WHS #legal
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