We know a client is knowledgeable when the first question they ask is, are you licensed? Sometimes, when we do design work, or meet with people to offer a bid, a prospective construction client will ask, does it matter if I use a licensed contractor? Why? What if I know someone who has always
done really good work but doesn’t have a Contractor’s License? What if she’s an electrician, works for a really low rate, but never passed the test, got insurance, pays every year to keep up her license? Or can the hyman plumber I know, he’s a nice guy, but doesn’t carry insurance, or workman’s comp, oh, but he did cause a little flood damage one time to my friend’s basement? Oh, did you just say an unlicensed contractor just caused damage to a friend’s home? And did he pay for the repair?
Contracting is an exacting, technical, deming discipline. It requires breadth of experience, expertise in a variety of trades, business acumen, sales management skills, carries with it a serious responsibility to the community of people served by each individual licensed contractor. Licensed contractors must demonstrate at least 4 years of experience/education in the trade for 
which they are licensed, be fingerprinted, have an FBI background check, be bonded. Overhead costs are extensive. Contractors who have employees must pay Worker’s Compensation Insurance, a complicated mathematical computation each month for each man hour worked, based on the type of work performed the rate of pay received by each employee. Each contractor must carry Liability Insurance in line with the amount of gross receivables from the prior year. There are annual payments to the State to renew the Contractor’s License, there are frequent audits of the business from the Insurance Carriers Worker’s Comp to make sure your record keeping is correct.
Specialties, such as Plumbing, Roofing, Electrical Sheet Metal work all carry additional premiums due to hazards associated with those trades. That is one reason you see specialization many different “subcontractors’ used even for one master bath remodel. And this is what contractors refer to as “Overhead” it is used to calculate the hourly rate a contractor charges their clients. It’s all about client safety. It is “playing by the rules,” which is not the case with an unlicensed contractor. The unlicensed contractor may appear to cost less on the front end, but are under no obligation to 
warranty their work, nor are you or they protected against any accidents or damage or property loss on the job. If they have an accident on YOUR property, in fact, YOU can wind up being liable for their medical expenses!
At HB Building Design Inc., we choose to provide Health Insurance for our workers. It has been tough keeping up with the monthly premium of $1400 for our workers this past year. We consider it a necessity, as it is required by all employers in our neighboring city of San Francisco. But it is a $16,800 annual investment that has to be paid for somehow. Our work product is excellent, our clients appreciate that. But they are no different in wanting to pay the absolute bottom line price!
A few other hazards of hiring unlicensed contractors:
– When we follow on after an unlicensed person worked on the electric or plumbing system, our team can be severely injured if things were not done to code!
– The consumer has no recourse (Contractor’s State Licensing Board) to register resolve a complaint for poorly done work.
– An unlicensed contractor will more often start a job disappear if something better comes along, or if he runs out of money because he underestimated the cost or actual time involved in the job.
So now you know a little bit more about what goes on behind the scenes of the contractor’s business, how they set their price. If a price looks too low to be true, there probably is a good reason for it, you should ALWAYS check with your local licensing service to ensure that your contractor is up to date with all their requirements. In California, the place to check is http://www.cslb.ca.gov . Your contractor must include a 3-Day Right To Cancel notice with his contract, may not take more than $1,000 deposit for labor on any job, no matter what the size. They may present you with a bill for materials ordered you should pay for them as they are delivered to the job site. And finally, you may request a Proof of Liability Coverage form for your job from the Contractor once you have signed the contract that will cover the term of your engagement, just to be safe!
Remember, we are here to help serve you, keep you safe, HB Building + Design won’t leave until your job is COMPLETE!
