Paying Employees by the Hour
Are you still paying employees by the hour?
I felt the need to write this article after finally wrapping my head around a creative way to pay the employees in my lawn maintenance company. I knew hourly was not really working for us, but it still took me about a year and a half to finally figure out exactly how to pay them in a different, creative way. If you are still paying employees by the hour and feel the need for a change, hopefully you can find some insight here.
Paying based off performance
What I ended up doing is figuring out a way I could pay each employee based off the performance of their crew. In theory this sounds pretty simple, but then I realized I needed to be able to quickly and easily determine their pay each week, which proved to be a little more difficult. With the help of our scheduling and invoicing software, I was able to implement the system we currently use. I am confident you, or we if you hire our firm Good Business 101, could find a similar method to pay your employees.
What I was realized was that I was paying my guys for a lot of time each day when they were not producing revenue for the company. Paying them by the hour almost encouraged them to take more time than needed to complete tasks. After implementing the percentage pay system I have noticed more efficient operations in the field…what a shocker! The funny thing is, is that now I don’t really care how long they take as long as the work is getting done on time, and done right. It is also important to maintain your quality standards once implementing a system like this because you have to keep in mind your employees may rush through jobs to make more money faster. That leads me to the other half of my pay system.
On top of the percentage pay system, we utilize bonuses. Our bonus pay system is so extensive it can account for 1/3 of an employees pay during a season, or more. This is what keeps them motivated and honest. We offer bonuses for everything from showing up on time, to not calling in, and customer compliments, among many other things. One key bonus item I got from my partner Ethan at Good Business 101, is offering them a bonus for completing a personal budget each month and sharing the results of how they did.
The key here is to make sure you can quickly and easily add up bonuses for the employees. I do this by having them document all related bonus items throughout the month. I simply verify the information and apply their bonus to their check the following month.
What do you think?
I would love to hear you feedback on this. I know there is still a place for hourly wages, but I also feel performance based pay is much more fair for the employer and employee, when possible. My ultimate goal as a business owner is to provide as much value as possible to our customers. I feel by paying based off performance, with a bonus system, is the way to accomplish this in today’s business world.
-Ryan Sciamanna, Good Business 101