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Labor Escalation Clause Calculator
Labor escalators pass wage increases through.
Owner burden
$344,250
Total wage increase
$459,000
GC burden
$114,750
How the math works
Total wage increase = labor × subject × wage %. Owner = increase × pass-through.
$12M × 85% × 4.5% = $459k total increase. × 75% = $344k owner burden. $115k GC.
How to Use
- Enter labor baseline cost.
- Enter wage increase %.
- Enter labor % subject to increase.
- Enter labor share passed through %.
- Read owner burden.
Frequently Asked Questions
Why separate from material?
Labor costs typically rise steadily (CPI-linked union contracts, tight labor market). Material can spike. Different clauses with different structures. Labor clause smaller threshold but steady; material clause sharp threshold but rare trigger.
Typical terms?
Labor: CPI-linked pass-through at annual review. Or tied to union contract escalators (typical 3-5% annually). Or fixed escalator (2-3%/yr). Material: threshold + share structure typical. Both negotiated project-by-project.
Risk transfer?
Without clause: GC carries labor cost risk (priced into bid). With clause: owner retains risk (bid lower but owner pays increase). Multi-year projects: clauses save 1-3% on contract price vs priced-in risk. Material on long builds.
How often should I rerun this?
Rerun this calculator whenever inputs change materially — new rent roll data, rate moves, loan balance updates, or quarterly operating data. For active deals, monthly refresh is typical. For stabilized assets under monitoring, quarterly is fine. Treat the output as a decision tool, not a one-time answer — market conditions evolve and so should your analysis.
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