Landscape construction projects can involve a multitude of challenges and in overcoming them it always pays to have the most efficient, cost-effective tools and equipment on hand.
The decision to purchase any type of equipment is a significant investment that shouldn’t be taken lightly. While there are certainly advantages of outright ownership of equipment, no matter how big or small, the overall financial benefit to your business model and the return on investment needs to be considered. There are decent tax incentives to being able to offset the purchase of equipment as a depreciating asset but unless the equipment is in regular use and increasing productivity, it may be better to hire. You should think about leasing or renting equipment when it has high maintenance costs, can quickly become outdated, or is only used occasionally. The general rule of thumb when it comes to plant equipment is that if it’s not used for 60-70 percent of the time then hiring it may be a better option.
Take a practical approach when it comes to hiring plant and equipment to reduce the risks that could lead to potential litigation by implementing the following:
- Check that policies and risk assessments cover any hired plant or equipment
- Maintain any hired plant and equipment while it is in use
- Only use reputable hire companies that maintain high standards of maintenance and rigorous inspection routines
- Maintain competency records of any operators using hired plant or equipment.
- Check that all plant and equipment is inspected for damage prior to hire and on return
- There are distinct advantages to hiring or leasing plant and equipment that makes good business sense.
- No full upfront payment for the asset eliminating the need for borrowing money or using cash to purchase
- Provides access to a higher standard of equipment that may be too expensive to purchase outright
- Payments can be spread over a period of time or pay as you go when hiring so planning and cash fl ow become easier to manage
- Tax deductions from income are available under lease arrangements
- Operating leases and contract hire may also include maintenance and carry the risk if equipment breakdowns reducing the need to plan for downtime as a result of breakdowns
- Buying eats up capital, after warranty runs out repair costs and spares are down to the contractor
- Leasing companies have buying power and are able to access better deals on equipment, which are passed on to consumer
- Equipment upgrades are easily accessed particularly when hiring equipment
There are of course some disadvantages with leasing or hiring that should be considered before making a commitment to enter into a contract.
- A deposit or advance payments may be required depending on the contract
- You could get locked into a long-term contract that may be difficult to terminate
- Additional administration is required in managing a lease and can add to administrative business costs
When considering financial decisions many contractors overlook the total cost of equipment management. For example, if you’re based in Sydney and successfully bid on a job in Canberra, you must think about the cost of transporting equipment 300km. The costs of the truck, the driver, loading and unloading time and fuel should be included. Once on the jobsite you’ll need to maintain and fuel the equipment. Consider geography, it may make more sense to rent equipment at the destination than it is to transport it.
There is more to hiring equipment than just price, work health and safety should always be at the forefront of every contractor’s thinking and this applies to the hiring of plant and equipment. Whilst there is a legal obligation on the part of any supplier of work equipment, whether hired or loaned, they must ensure that it is fi t for purpose and will be used in accordance with its design parameters.
The competency requirements for operating most hired equipment tend to be stated in the general terms but there are specific competency requirements that relate to drivers of mobile work equipment and chainsaw operators. Along with duties placed on employers and the self-employed, a duty of care is also placed on hirers and suppliers of leased or loaned equipment to ensure that those using it are competent. Equipment users should also be supplied with any instructions or information relating to safe use and maintenance of the equipment. The amount of detail that needs to be supplied will be determined by the complexity and potential risks. Regardless of whether hiring or purchasing plant and equipment for use on the job, the onus is on the individual proprietor of a business or undertaking to ensure all plant and equipment is in safe working order and that all aspects of operator competence are addressed with safety controls in place. Remember the only defence in workplace accidents is that you have exercised your duty of care.
More Than Just Equipment
Hiring equipment is just one aspect of managing your business. There may be times when you just don’t have enough qualified and experienced staff on hand to ensure construction progress. There will be times when staff are on leave, fall sick or decide to move on with short notice. In these situations, a labour hire company could provide the team you’re looking for. Labour hire companies can provide access to personnel with short-term key skills that can benefit you covering leave and peaks in demand when talent shortages can potentially hinder progress of construction. These flexible solutions are particularly useful on long-term projects and for interstate projects where local labour sources may be a better option when it comes to improving the bottom line.
With so many options available to contractors when it comes to hiring and leasing arrangements, it is certainly worth exploring the full range of services available to determine how they could assist in taking your business to the next level. Buying equipment outright may at first seem like the best option, but it’s always a good idea to think about whether this makes best use of your working capital. It may be more cost effective to hire or lease.