# Critic my employee pay plan.



## Mike Finley (Apr 28, 2004)

I'm putting together an employee pay plan for down the road for full time employees. This is the beginning of a process or method I am considering.

I see a "crew" being a lead and an assistant.

*Issues *- getting the lead to take 'ownership' of the job, his tools, materials, customer relations, and his assistant.

*Problems *- keeping tools from being destroyed, lost, miss used, broken, abused, wasting materials, training the assistant to eventually become a lead.

*Problems *- Legally you can't back charge employees for breaking things.

Possible solution.

Instead of paying a lead $18.00 an hour, pay him $16.00 with the ability to earn $20.00 an hour through individual job bonuses splint between him and his assistant for each job completed. 70/30 split between lead and assistant.

Example : This job through calculations based upon length, complexity and dollar amount of of has a $600 bonus pool available to it. 

The full bonus is available by:

_(1) completing the job on time, while meeting quality levels dictated by our quality control manual with individual specifications for all tasks completed.
-$100 subtracted from the bonus for every day job runs over.
-$100 subtracted for a call back._
_
(2) Receiving a top rating in all areas of the customer satisfaction survey. 
-$50 subtracted for every rating below the top rating in each category

(3) No additional financial expenses to the company during the job.
- Tool repairs or replacement are deducted directly from the bonus pool. 
- Any repairs caused by damage to customers home are deducted directly from the bonus pool.
- Any extra materials required beyond what was required are deducted directly from the bonus pool._

Comments?


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## mdshunk (Mar 13, 2005)

Mike Finley said:


> Instead of paying a lead $18.00 an hour, pay him $16.00 with the ability to earn $20.00 an hour through individual job bonuses splint between him and his assistant for each job completed. 70/30 split between lead and assistant.
> 
> Example : This job through calculations based upon length, complexity and dollar amount of of has a $600 bonus pool available to it.


An hourly rate plus some bonus sounds like a good idea. Your proposed calculation to that bonus seems too complex. If it were just a % of that job's profit, it would necessarily take in all the below items that go into your version of a calculation. Not sure where the quality audit and customer survery play into my suggestion, though. If time overruns, cost overruns, damages, etc., were charged to "the job", it would impact the profit, thus the lead's bonus pay. A "simple" calculation rather than a calculation based on a list of things prevents misunderstandings and hard feelings. Just my thought. 



Mike Finley said:


> _- Any extra materials required beyond what was required are deducted directly from the bonus pool._


That is highly subjective, and sometimes may necessarily involve a phychic estimator. "What is required" cannot be defined in black and white, and can cause further misunderstandings and hard feelings.


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## dougchips (Apr 23, 2006)

Mike Finley said:


> I'm putting together an employee pay plan for down the road for full time employees. This is the beginning of a process or method I am considering.
> 
> I see a "crew" being a lead and an assistant.
> 
> ...


Looks like a good idea, my concerns;

#1. I can understand your desire to have your staff take good care of the tools. Unless they abuse the tools, repair or replacement should already be in the budget. Tools needs servicing and they die, not always the operators fault.

#2. Extra material is fair so long as the salesperson did not under estimate the job. Or if they call you to say that they need some extras for rot repair and you decide not to have the customer pay.

I love the deductions for the customer survey part.


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## Mike Finley (Apr 28, 2004)

Don't get too caught up on the bonus calculation, just figure there is a way to calculate a bonus for every job.

Extra materials - Right now I am considering extra materials being like we buy a $600 tub surround for a job and somebody on the crew ruins it by measuring once and cutting twice and another one has to be ordered (Sage's issue of the crew member over cutting the hole for the sink and ruining a $900 Formica counter top would fall into this) 

My entire purpose for this in regard to materials is to get somebody to be careful because their bonus depends on it (create some accountability), and for a lead to train an assitant to be careful too, making the lead a better trainer and helping the assistant be a better tradesman.

Not saying like we figured 1.5 tubes of caulk and they needed 2.26 tubes.:laughing: 

Also eventually I would like to have a salesman's commission tied into this too based upon how the job was sold and estimated and how close it actually comes to being installed. Did they leave out the $150 of cost for moving the electrical switch? The salesman and the crew's bonus would be connected so a lousy salesman gets pissed off crews and gets a private blanket party if he keeps screwing with their bonus and vise versa to the salesman.



> I can understand your desire to have your staff take good care of the tools. Unless they abuse the tools, repair or replacement should already be in the budget. Tools needs servicing and they die, not always the operators fault.


I certainly understand that tools just wear out, but sometimes simplification is easier, and sometimes in life you just get screwed, the recip saw coughs up and dies on your job, well, that's the way it goes and $125 is coming out of the bonus pool to replace it. Maybe it had nothing to do with you (the lead) or maybe you need to watch that assistant a little more closely? If nothing else, the tool gets replaced, you lost some bonus money, but on the bright side at least you know you will always be working with the good tools and not have some owner wanting you to use a router that only works on Fridays and has duct tape holding the switch in place. Also I can see it helping keep tools from being lent out, the assistant wants to borrow the framing nailer over the weekend and asks the lead if it is okay, the lead thinks, no freaken way, it breaks and it is costing me money. Instead of, sure, don't tell anybody you took it, and if it breaks, hell, we will just say it broke on the job on Monday.

Anyways, those are thoughts behind what I am considering. I am always open to suggestions.


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## mdshunk (Mar 13, 2005)

Mike Finley said:


> I certainly understand that tools just wear out, but sometimes simplification is easier, and sometimes in life you just get screwed, the recip saw coughs up and dies on your job, well, that's the way it goes and $125 is coming out of the bonus pool to replace it.


That is intolerable, and would be a real sore point with me. For me to be okay with a tool repair coming out of my bonus, it should be a clear result of my actions, such as dropping a tool off a ladder, sawing through a circular saw cord, etc. I would rather use my own tools before I had to pay for every repair of yours out of my bonus.

I think what you're trying to structure is excellent, but this tool repair thing bugs me.


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## dougchips (Apr 23, 2006)

Why not run the same program for your sales staff. If your average job is $10,000 and you pay 10% they would make $1000. If you lowered it to 9.5%, you would have $500 left over to cover their errors or omissions. 

I think that if you combined the salespersons bonus with the crews you might start a small war. 

BTW, who would pay for the .76 tube of caulking?


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## Tscarborough (Feb 25, 2006)

If you want the lead (the crew, actually) to take ownership, then get them involved from the beginning and give them a simple to understand bonus based on their recommendations for the project and it's timely completion.


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## ButlerDesigns (Nov 27, 2006)

Mike,

I like the idea, but agree with MDSHUNK. You blaming a employee for a tool that just dies because you have had a million people work it like a horse should not have to pay for it. Thats like your kid riding his bike next to your car and later you see a scratch on that beautiful 68 GTO, so you go straight to him and beat his butt. Later the next day you find out that it was little Steven next door who did it. My whole point would be to see why it broke before assuming. To repair and replace tools should all be in your overhead. I can see if a guy gets P'ed at the other guy and throws the saw and breaks the blade in half. You were on a good path, but the tool thing at the end killed it for me personally. Edit that part, because I can tell you right now not one single employee will like that. They will tell you to take your tools and  . You are on a really good path and I truely think that will get a crew working hard for quality and being careful at the same time. Just my 2 cents :thumbup:


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## dougchips (Apr 23, 2006)

Not to keep beating on the tool thing, one last try.

Recip saw 5years old, cost to replace new $150, cost of one at a flea market (used) $35.00. The worker should be able to at least replace a used recip saw with a used recip not a new one. Just don't let them support pawn shops!


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## [email protected]&R (Jul 26, 2005)

Sounds like whats called a lead carpenter concept to me. I would do a search for lead carpenter concept. It has already beed used and is much simpler.

Labor costs controlled. The lead carpenter must be given a labor budget and an incentive. For example, if the labor budget cost on a job is $4,000, go over it with the lead carpenter item by item, agree on whether it is reasonable and complete, and from that point on, the lead carpenter is responsible to stay within that budget. If the lead "beats" the labor budget, the savings are split (if that $4,000 labor budget comes in at $3,600 the company gets $200 and the lead carpenter gets $200).


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## Mike Finley (Apr 28, 2004)

dougchips said:


> I think that if you combined the salespersons bonus with the crews you might start a small war.


That might be a side benefit of it. I want accountability and no us vs them, to prosper the most possible requires everybody to figure out how to work the system to their benefit which might just include the old tried and true boot camp system where a squad is only as good as it's weakest member. He screws up and the entire squad suffers. Want to stop losing your weekend passes over Gomer Pyle not knowing how to shine his shoes correctly? Eventually the squad figures out the best thing to do is teach Gomer how to shine his shoes.

Possibly a simple name change from 'bonus' to 'profit sharing' might ease the sting of the tools issue as it might take away the mentality of that bonus is mine already instead of that profit is mine after expenses are subtracted.



> You blaming a employee for a tool that just dies because you have had a million people work it like a horse should not have to pay for it.


Only 2 people use those tools, the lead and his assistant, nobody else -each crew gets it's own fully stocked trailer. (this 1st one I am buying is being set up with that in mind.) They are the only ones who use them, they should take some mental ownership of them. By the way they would also be responsible for inventorying it on a monthly basis for consumables.

Why I don't see it as a big deal - Reality is, I've got at least $15,000 worth of tools -

- I've had probably 1 tool break on me in 3 years through no fault of my own. 

- I've broken 2 tools by my own missuse in the last 3 years. 

- I buy top quality tools, not Harbor Freight

- They are also under warranty.



> Sounds like whats called a lead carpenter concept to me. I would do a search for lead carpenter concept. It has already beed used and is much simpler.
> 
> Labor costs controlled. The lead carpenter must be given a labor budget and an incentive. For example, if the labor budget cost on a job is $4,000, go over it with the lead carpenter item by item, agree on whether it is reasonable and complete, and from that point on, the lead carpenter is responsible to stay within that budget. If the lead "beats" the labor budget, the savings are split (if that $4,000 labor budget comes in at $3,600 the company gets $200 and the lead carpenter gets $200).


I'm not sure I'm into the whole "open books" scenario, but I do need to look into the lead carpenter system and see if I can apply some of it. I'm sure there is some good stuff I could use or at least spring board off of.


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## mdshunk (Mar 13, 2005)

Mike Finley said:


> ...requires everybody to figure out how to work the system to their benefit which might just include the old tried and true boot camp system where a squad is only as good as it's weakest member. He screws up and the entire squad suffers. Want to stop losing your weekend passes over Gomer Pyle not knowing how to shine his shoes correctly? Eventually the squad figures out the best thing to do is teach Gomer how to shine his shoes.


The trouble with the tried and true boot camp system is that it is only tried and true in the military. People in military boot camp do not see any other options. In the working world, when insufferrable conditions are met, guys get another job.


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## Mike Finley (Apr 28, 2004)

mdshunk said:


> The trouble with the tried and true boot camp system is that it is only tried and true in the military. People in military boot camp do not see any other options. In the working world, when insufferrable conditions are met, guys get another job.


I've seen it work many times outside the miliary, I've experience it myself. There is a hurdle to overcome, but it's all in the management, number one, you have to hire right and number two, you have to make sure that everyone knows the team concept is the corner stone of the companies philosophy, if you give everybody the idea it's about divide and conquer, every man for himself, that is exactly the type of guys you will create. 

If Joey keeps effecting Leroy's and Benny's paycheck then Leroy and Benny will damn sure bring it to Joey's attention and better yet, they will bring it to my attention. The first line of defense is knowing there is a problem. Once you know Joey has a problem you can work on helping him fix it. Communication is open now and it's time for the company to take Joey, Leroy and Benny out for lunch and talk about what everybody can do to fix the problem. Get the issue out there, get some solutions, get some commitments from them, let the employees take ownership of the problem and more importantly the solution. Set up a date to revist the issue and check on progress. Joey knows he has accountability, he knows his performance effects not only the company (not a big deal to most people), but more importantly he knows his performance effects his fellow employees. Leroy and Benny have a vested interest in letting Joey know where he is screwing up and how not to. Joey finds out stuff he didn't even know about production and Leroy and Benny figure out stuff they never knew about sales.


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## mdshunk (Mar 13, 2005)

When more than one person points out what they belive to be an issue with your plan, and you explain why you don't think it's an issue, is it no longer an issue then? Just wondering.


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## Pearce Services (Nov 21, 2005)

Mike,

I think the basic concept has merit, but a couple of concerns I would have based ion being in a similar structure in the past,

First off, you should find a way to show how you ADD for good surveys, budget and schedule perrformance, as opposed to subtracting, which creates a negative aspect to every little set back on a project.

Second, you will need to keep a log book on projects, (which is a good idea for most project anyhow). This will give them a chance to document issues beyond their control without getting involved in finger pointing, salesman bashing, and unnecessary customer involvement regarding internal issues. Then you need to accept the "excuses" with minimal resistance. Followed by asking for recommendations on how to reduce those problems in the future. At this point let them know which issues you believe are controllable by them, and let them know that on the next one, they will be responsible for seeing that it is corrected from their end, or it will effect the profit sharing benefit.

Third, you need to establish a firm policy on how to handle any and all issues that they are not willing to accept responsibility for. Stopping the project to call and ***** about an oversight by your estimator, while the helper is sitting doing nothing, and the customer is listening is unacceptable. In a company I worked for in the past, they were paid by the unit for installations. The guys bitched about every little thing, and walked off of jobs because there was an issue. It got to the point that these guys would find excuses not to work. 

But the biggest issue by far was the installers campaigning to the customer about whatever was a problem so that they could have some one on their "side", and in doing so weakens the relationship between the company and the customer.


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## dayspring (Mar 4, 2006)

Giving a bonus is a great idea. I'm not sure I would offer a bonus to anyone but the man that I have running the show. As far as tools go, you already have them in budget, I'm sure, so drop that. If an employee(s) don't care for them properly, FIRE 'EM! Material mistakes, like you said above, ruining something, that happens on occasion and maybe you could have that included in your "Bonus Pool", but I wouldn't nick-pick it too much. The customer survey is a good idea, I use one, and could and should be used as a + or - in the bonus. Call backs should not happen. Depending on when you plan to give the bonus that one may be hard to deduct unless you don't give the bonus until your warranty period is up. 
You can't hardly give it and then take it back.:w00t: 

Overall Great Idea


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## Bob Kovacs (May 4, 2005)

In addition to the tool issue that everyone's brought up, I see a few other flaws:

"-$100 for every day the job runs over"- Who's deciding how many days it should take? You, the estimator, or the lead carp? How do you determine if the delay is truly the crew's fault? 

"-$50 for every rating below top in the category"- What if the customer is just the type of person who will never give you a 5 out of 5? Some people can't ever be thrilled by a bathroom remodel, and will give your 4's because they didn't get excited about the process. So the crew loses out because of that?

One of the builders I worked for in Vegas had this insufferably complex bonus system that was tied to a dozen different categories, needed input from a half-dozen people, and damn near required calculus to do the math to figure out how much you were going to get. By the time you figured out the paperwork, split the $$ with the assistant super, the PM, the secretary and the laborer, it wasn't even worth trying to get the bonus.

Keep it simple- explain your expectations up front, pay the guy what he's worth in the first place, let him know that you give bonuses if the company does well, and then surprise him with a few hundred bucks in his paycheck when the job is done. If you make a big deal out of this bonus deal, the guys will always be looking to cut corners to save time and avoid going over, hiding damaged tools to avoid getting dinged for them (and possibly creating some safety issues in the process), etc.

Bob


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## Joasis (Mar 28, 2006)

The problem Mike, would be with having a helper who doesn't think it is fair....the split ratio. Might give that some thought. I pay bonuses if we finish a project early, if we work a lot of late hours, whatever...but I do this on an employee by employee basis....based on what they are actually worth to me. Damaged tools or the blown motor in my step van last summer cannot be deducted, but you don't have to pay bonuses.


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## Mike Finley (Apr 28, 2004)

mdshunk said:


> When more than one person points out what they belive to be an issue with your plan, and you explain why you don't think it's an issue, is it no longer an issue then? Just wondering.


MD - If you are looking for a "Yeah, that does suck, you're right." it ain't gonna happen. At this point there is no - that is perfect - that is wrong in any of this, I'm not out to create the actual pay plan in concrete in the next day using this forum. 

I'm outlining the ideas of the plan, some details and more importantly my *thoughts *on why and how I am looking in a certain direction. It's more a work in progress and information gathering at this point. I'm taking it all in, but just because I don't say, yep, forget that aspect doesn't mean I won't later, just because I explain where I am coming from doesn't mean I won't change something, it's just a discussion.


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## Mike Finley (Apr 28, 2004)

For the rest of the stuff replied, it looks like good feedback and I will try to read it all tonight. Thanks so far and keep it coming.

One thing I have gathered is the word BONUS needs to be removed from any description of this for obvious reasons now how people look at what a bonus is.


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