We hired a residential contractor/home builder to remodel the master bed and bath and redo the landscaping on an almost 4 acre property located in Rancho Santa Fe, CA. He has us paying the employer burden for his five employees one being the project manager and the other four doing the work. For example, on a weekly payroll basis we are paying for each employees Social Securty, Medicare, Unemployement, Liability Insurance, employee benefits and Workers comp. In addition to that we are also paying a 10% overhead fee for the entire invoice and 10% contractors fee for the entire invoice. Invoices include payroll, home depot receipts and project equipment rentals, and subcontractors invoices. This does not seem right to me. What do you think about this?
Based upon what you wrote, you are correct.
It appears the contractor is charging you on a "Cost-plus" basis. Cost is "time and materials" and plus being "overhead and profit." It also appears that this is a "home improvement contract" (HIC). The requirements for HIC are found in Business and Professions code section 7159 and 7159.5. In short, per 7159.5, the contractor has to give the homeowner a "fixed price" for a HIC. If your being charged at a "cost-plus" rate that is grounds for disciplinary action with the CSLB.
Brion Berkley, Esq.