Your General Contractor Hourly Rate Schedule — Why It’s Time Sensitive

You negotiated the contract for your project and reviewed and approved the hourly rate schedule (or did you?). You feel good about where things stand and then your General Contractor Hourly Rate Schedule changes.

Union rates just renewed under a new Collective Bargaining Agreement (CBA). Your contractor starts billing at new rates and the Accounts Payable team flags the invoice because it doesn’t match the contractor hourly rate schedule in the agreement. Your Project Manager doesn’t connect the dots. The subcontractor who did the work 30 days ago is now waiting 60 to 90 days to get paid — for work that was never in dispute.

Welcome to one of the most preventable — and most repeated — payment problems in commercial construction.

What an Approved Contractor Hourly Rate Schedule Actually Is

An approved building contractor hourly rate schedule is exactly what it sounds like: a pre-approved list of labor, project management, and equipment rates that a contractor is authorized to bill under your contract. It is submitted by the contractor before invoicing begins and agreed to by the owner in writing.

Here is sample of what the contract language that governs it may look like:

“Owner shall pay Contractor for Services actually performed by Contractor based on an approved Hourly Rate Schedule. Schedule to be submitted by Contractor in advance of any invoice to the Owner on a monthly basis. It shall reasonably detail time expended and a description of the nature of the approved Contracting Services rendered. The Owner shall pay the approved Hourly Rates to Contractor for such services within the terms of the Construction Contract when executed.”

On the surface, this is clean and straightforward. The contractor submits rates. The owner approves them. Work gets billed accordingly.

The complications start the moment anything changes — and in construction, something always changes.

The Union Contractor Hourly Rate Renewal Problem

If you are working with union contractors, you need to know the rates may change within a given calendar year. This largely depends on where you are located.

Here are some real-world regional examples to illustrate how a contractor, billing across different jurisdictions, can get caught off guard by unexpected trade anniversary dates:

Grounding the Payment Lag: Regional Realities

Union CBA contract updates do not follow a uniform corporate calendar. Depending on where your project is, those anniversary dates drop at completely different times of the year:

• The Hawaii Fall Shift (September 1st): Operating Engineers, Ironworkers, and Teamsters adjust right after the summer peak. This means October invoices carry a surprise rate hike that catches mainland-based A/P (Accounts Payable) systems completely off guard.
• The Mid-Atlantic Spring Window (May 1st): Ironworkers, Laborers, and Commercial Carpenters in the Northeast/Mid-Atlantic often renew as heavy spring paving and building season kicks off.
• The Pacific Northwest Closeout (October 1st): Heavy civil trades like Pile Drivers and specialized marine contractors stagger their updates into the fall. This creating friction right during the owner’s Q4 financial reconciling.
• The Midwest/Texas Standard (January 1st / July 1st): Many basic trades in the central states align strictly with the fiscal half-year marks. This creating a predictable but still frequently missed rate change.

Here is the critical point: your contractor is not obligated by standard contract language to notify you when this happens. Experienced owners working with union contractors know the CBA calendar. Less experienced owners — startups, small businesses new to commercial construction — often do not.

Contractor Hourly Rate — Be on the Lookout

If your project runs through September and you are working with union contractors, budget for a rate increase in Q4. More importantly, make sure your contract defines the process for updating the rate schedule when CBA renewals occur — before you sign, not after rates have already changed.

The Zero-Dollar Change Order Nobody Initiates

When union rates change, your original contract-approved hourly rate schedule needs to be updated. The process for doing that is a Change Order — but here is where the process breaks down.

The Change Order (CO) to update labor rates is a zero-dollar CO. No money changes hands. It simply amends the existing contract rate schedule to reflect new CBA rates. And, establishes that those rates are valid through the next renewal date. It is purely administrative. It is unsexy. And because it doesn’t move any money, it frequently gets a very low priority — or never initiated at all.

Here is what happens next:

• The subcontractor keeps working — they have a schedule to meet
• 30 days later they submit an invoice at the new CBA rates
• The Project Manager receives the invoice for approval but doesn’t connect it to the original contract rate schedule
• A/P flags the discrepancy — the rates don’t match the contract
• Now everyone is scrambling to process a Change Order that should have been done weeks ago
• The subcontractor ends up waiting 60 to 90 days for payment on work that was never in dispute

This is an organizational failure, not a contractor failure. But the subcontractor pays the price for it — and the owner’s reputation as a reliable payment partner takes a hit.

From the Field — General Contractor Hourly Rates

The Fix: Define the Process Before Renewal Arrives

The solution is not complicated. It requires one conversation during contract negotiation and one line of process in your project administration.

In the Contract:

• Add language that anticipates CBA renewals and defines the update process.
• Specifically, the contract should state that when union labor rates change, due to a CBA renewal.
• The contractor will submit an updated rate schedule within a defined number of days.
• The owner will execute a Change Order to incorporate the new rates within a defined number of days of receipt.

In your Project Calendar:

Flag the CBA renewal date. Assign someone — PM, owner’s rep, project administrator — the responsibility of initiating the rate schedule review. This happens before the renewal date, not after the first invoice arrives at new rates.

For the Contractor Hourly Rate Change Order Itself:

The sample change order language is straightforward —

“This Change Order hereby amends the Approved Hourly Rate Schedule attached to the Construction Contract dated [executed date] to reflect updated rates effective [CBA renewal date]. The amended rates shall govern all invoices submitted on or after [effective date] and shall remain in effect through the next scheduled CBA renewal date, or until further amended by mutual written agreement.”

Zero dollars. Simple language. Executed before the first invoice at new rates arrives. Problem solved.

Non-Union Contractor Hourly Rates: A Different Conversation

If you are working with non-union contractors, the CBA calendar doesn’t apply — but the rate protection conversation still does.

Depending on the project size and the existing relationship between owner and contractor, non-union contractors will often agree to hold their rates fixed for the duration of the project. This is a legitimate negotiating point, and it is worth asking for explicitly and getting in writing.

What “in writing” means here: the approved hourly rate schedule, once executed, should state that the rates are fixed for the project duration. And, are not subject to adjustment except by mutual written agreement. That single sentence protects both parties — the owner from mid-project rate increases, and the contractor from any confusion about what was agreed to.

Ask for fixed rates for the project duration. Most contractors working on a defined-scope project will agree. Those who push back are worth a follow-up conversation about why.

What Is Actually Inside That Hourly Rate — And Why It Matters on Some Contracts

There is one more thing small business owners and startups need to understand about approved hourly rate schedules — particularly on Time and Materials (T&M) contracts.

Contractor hourly rates are rarely just labor. A fully-loaded rate typically includes the worker’s wage, benefits, payroll burden, supervision, overhead, and profit margin. These costs are all baked into a single number. That is standard practice and not inherently problematic.

What owners on T&M contracts should be aware of is whether the contractor’s agreement also allows for an additional overhead and fee markup. If so, it’s on top of those already-loaded rates. In that scenario, overhead is effectively being charged twice — once inside the rate and once as a markup applied to it.

This is not automatically improper. On a lump sum contract, the contractor’s rate structure is largely their own business. Margin is built into the bid price and the rate schedule only becomes relevant when Change Orders arise. You may not be entitled to a full breakdown, and that is a reasonable commercial arrangement.

On a Time and Materials contract, where you are paying based on actual hours and rates, what is inside the rate is your business. Before you approve a T&M rate schedule, ask directly: does your contract also provide for overhead and fee markup on top of these rates? If the answer is yes, that is a negotiating point — not a dealbreaker, but something to understand and price into your budget.

On a lump sum project, scrutinize the rate schedule before you sign — because those are the rates that will apply to every Change Order on the project. By the time a CO lands on your desk, it is too late to renegotiate the underlying rates.

The Contract Administration Problem Nobody Talks About

All of the above assumes that the people processing invoices actually know what the contract says. In many businesses, including small businesses and startups, they do not.

Leadership negotiates and signs the contract. It goes into a file. Accounts Payable (A/P) receives invoices and processes them — often without ever seeing the executed contract or the approved rate schedule.

When something doesn’t match, the result is delayed payments, strained contractor relationships, and a scramble to resolve a problem that should never have existed.

The fix is simple but requires active planning:

• A/P should receive a copy of or have access to the executed contract and approved rate schedule for every active project
• The Project Manager should be looped in on any invoice that triggers a contract question — not after the fact, but as a standard step in the approval process
• Rate schedule updates — even zero-dollar ones — should be tracked and distributed the same way the original contract was

Contract administration is not glamorous. But the cost of not doing it — in delayed payments, damaged relationships, and unnecessary disputes — adds up fast.

The Bottom Line

An approved contractor hourly rate schedule is a living document, not a one-time checkbox. Union building contractor hourly rates can change on a calendar that you can plan for.

Non-union contractor hourly rates can be protected if you ask. T&M contracts require you to understand what you are actually approving before you sign.

None of this is complicated. All of it is preventable. The owners and project managers who stay ahead of it build reputations as fair, reliable partners. And, that reputation matters more than most people realize when it comes time to staff the next project.

Related reading: Change Orders are the process for updating your rate schedule — and one of the most misunderstood parts of any construction contract. And if you are negotiating contract terms with a contractor-supplied agreement, make sure you understand which document controls when terms conflict.