# Bonus & Incentive Pay



## DT Builders (Aug 19, 2010)

Hello


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## genecarp (Mar 16, 2008)

I have never found that to work, to many variables, to many opportunities for rushing, full disclosure of profit to employees (not a good idea), not for me, I do however believe in random bonuses, BTW, how about an introduction to the gang, GMOD


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## Jeff G (Apr 5, 2010)

How about putting some, or all, of the unforeseen profit into an interest bearing account and divvying it up at the end of the year in say, a Christmas bonus perhaps? Sure would be a welcome addition for most any recipient, an you could just explain, if you feel like it, that it was due to their excellent job performance on whatever particular project.

I dunno, just an idea.


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## concretemasonry (Dec 1, 2006)

To be an effective bonus, it should be given as soon as the possibility of a bonus can be determined and paid soon the the employee can see the rewards on the last job and concentrate on the next job. You are apparently looking for an incentive for performance, so it should be prompt as what your customers expect.

The formula you use for the calculation is up to you.

Goining to an annual basis removes much of the incentive and many people see it as "profit sharing", which you probably want to avoid except for select long term employees that are identified.


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## DT Builders (Aug 19, 2010)

How are You


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## SolutionsbySull (May 13, 2010)

Lincoln Electric of Cleavland can be googled up about their compensation plan.


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## JamesDibben (Apr 5, 2010)

I do this with my two employees and it's worked out great.

Before they leave the office they know a job pays let's say 8 hrs. If they get it done in 6 I still pay them 8. I don't have quality problems with these guys because they take such pride in their work.

A job that big is quite a bit harder to do it with.

Maybe take the profit difference between 300 hrs and 500 hrs and split it 50/50 with everyone. 50 to the company and 50 spread evenly to the employees.

Define what finished looks like. It seems like there is always go backs that no one could help.


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## Leo G (May 12, 2005)

One of the problems with rewarding your employees with an incentive bonus is after a while they will expect it. And when they slack off and then don't get the pay it will not make them want to work harder. It will have a negative effect on the company.

If you do it sporadically on a few jobs during the year it would work out much better.

End of the year production bonus is probably a better way to do it. Keep track of the guys that make it happen at your business and they get the bigger percentages of the bonus pool. Don't just give it to them, bring them into the office and tell them why they are getting this bonus. If they know why, they will have a positive reinforcement to continue to do the same thing next year. And they won't have to guess at why they got a bonus.


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## J L (Nov 16, 2009)

So, along your same line of thinking...If they finish a 500hr job in 600hrs, do you backcharge them the difference? Like a negative bonus? I think not.

Some jobs you make money, others, not so much. Like Leo said, the guys will come to expect it and that creates negative expectations. The best is the year end bonus.

If you can sell a 500hr job that your guys finish in 300hrs, well then, good for you :thumbsup:


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## JamesDibben (Apr 5, 2010)

I've been doing it this way for 3 years and it has worked great. My guys 'expect' me to bid a job in a way that gives them a chance to succeed.

If it takes 600hrs to do a 500hr job then maybe I bid the job wrong. It certainly isn't because my guys are in the corner doing nothing.

I hire up. My guys are awesome. If they don't get it done in the time allowed then either I messed it up or something went south. I'm not going to punish them.

I like my rewards to be quick, not take 8 months to deliver. I'm positive my employees like it that way too.


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## RH-Electric (Jan 16, 2010)

I really believe in providing incentives. The only workable way I've found to do this is through piecework. However a deck is a one-off custom hand crafted masterpiece, so piecework is out. I believe that showing the employee the margin for labor in a job is not a good idea. So, I'd give him a cash bonus to show my appreciation when he does a great job.


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## griz (Nov 26, 2009)

I gave out a bonus at Christmas time or after a job, usually some emergency, where we worked ridiculous hours & the guys gave more than would normally be expected.


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## concretemasonry (Dec 1, 2006)

Separating incentives(individual job performance) from a bonus(annual reliability, performance, quality of work and ability to work with others) is a good way to to incite other employees to improve.


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## jimAKAblue (Aug 15, 2010)

I think ALL bonuses are a bad idea. 

I worked for a general for a couple years back in the 80's. I was a salaried superintendent. I remember getting a 5k bonus at the end of my second year and all the other guys were complaining. Why? Because the bonus the year before was more. Once the standard is set, it only causes anger if you don't meet the expectations. 

There is a great book called "First, Break all the Rules" that delves into why bonuses don't work. You can get a lot more production and quality from your employers if you follow the simple principles laid out in the book and you won't have to pay bonuses.


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## JamesDibben (Apr 5, 2010)

That book is pretty cheap at half.com.

I might have to look into it.

I saw A LOT of that when I worked for my dad in his cabinet shop. The current year's bonuses were always compared to the previous year's regardless of what kind of year the business had. It's easy to make promises in July and not keep them in December.


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## newenergy (Mar 5, 2008)

jimAKAblue said:


> I think ALL bonuses are a bad idea.
> 
> I worked for a general for a couple years back in the 80's. I was a salaried superintendent. I remember getting a 5k bonus at the end of my second year and all the other guys were complaining. Why? Because the bonus the year before was more. Once the standard is set, it only causes anger if you don't meet the expectations.
> 
> There is a great book called "First, Break all the Rules" that delves into why bonuses don't work. You can get a lot more production and quality from your employers if you follow the simple principles laid out in the book and you won't have to pay bonuses.


Ok, for $6 at half.com I'll get it, but how about a teaser while I wait. If bonuses don't work, what do you do to reward and give incentives for a good job? Frequent small raises?


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## Leo G (May 12, 2005)

Please tell me why you should be rewarded for doing what you are already being paid for?

You have a job, possibly benefits - the boss gets you work every day, pays you every pay period. You are there solely to make him money. That is why he gave you the job. That is the blunt part of it.

If you have a boss willing to share the profits with you that is good. But, again, human nature will make you expect to get these bonuses after you become accustom to getting them. 

So you have been working for this company for 5 years. Each year at the end of the year he gives you a bonus. 1st year was $200, 2nd was $250, 3rd was $300, 4th was $400. But the 5th year was only $100. What is your feeling about this?

I'll bet you are pissed. The boss gives you $100 as a bonus and now you are pissed at him. You were expecting $500. You probably planned on getting that money and probably even had it spent already. The boss tells you that the company had a hard time this year and he struggled to even get you that $100. Told you that you were lucky to have the job and hope that he can keep finding work or you won't

I'll bet you are still pissed.


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## JamesDibben (Apr 5, 2010)

Those are some great points, of course.

Don't we all need incentives? I know that if I manage my business and finances well then maybe this month I'll have more profit. My incentive to manage well is higher profits (other things too of course). As an owner my income is VERY incentive based. My productivity effects my income big time.

Why should we expect our employees, who have even less power inside of the company, to behave differently? I think we all want to believe that if we work harder than expected then there is some reward waiting. We want our customers to give us referrals because of how great of a job we do. If they don't refer us then we feel slighted.

I think we expect too much to try and get our employees to think the same way we do as owners. Employees tend to think short term while the owners tend to think longer term. We also understand how hard it is to keep enough work coming in to get them hours.

Leo, the points you bring out are very accurate. Obviously you have seen it happen over and over again.

I like what I do because it's more of a trickle style of bonus. They know if they work hard and well on individual jobs they can make extra hours. None of my guys ever expect end of year bonuses. They know it happens day in and day out all year long.

End of year stuff is always so full of emotion. It's so much more difficult to be successful at.

Great content in this thread! Plenty for everyone to consider!


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## Leo G (May 12, 2005)

jdibben said:


> Those are some great points, of course.
> 
> Don't we all need incentives? I know that if I manage my business and finances well then maybe this month I'll have more profit. My incentive to manage well is higher profits (other things too of course). As an owner my income is VERY incentive based. My productivity effects my income big time.
> 
> ...




One of the reasons is that as an employee you are gonna get your check no matter what. If the job is estimated out at 50 hours and it take 60 hours, who looses? The owner does. He takes the risk, he gets the rewards or the pitfalls. The employee is gonna get a check for 60 hours for working for 60 hours. But you just lost 10 hours of pay. You took the risk and you lost. Part of business, but not part of being an employee.

Plus the employees usually don't realize that for every dollar you pay them you are likely to be paying $2 to have him work for you. Most everybody I talk to says, wow, you own a business..we know you have money.

Not always true. Sometimes the owner can be the lowest paid person in the company


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## JamesDibben (Apr 5, 2010)

Leo G said:


> Sometimes the owner can be the lowest paid person in the company


Don't even open that can of worms! :furious:

We did a prevailing wage job last fall and my guys made 3x their normal income.

None of them did anything smart with that cash. Still broke after the job completed.

I had a friend give us a kids bed a few years ago BECAUSE I owned a business. This guy NEVER gives anything away. He said himself that everyone just assumes business owners have money. He knew different.

None of this is very simple once you are on the inside. :sad:


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## Cjeff (Dec 14, 2009)

I think incentively are good but wonder about bonuses.
Perhaps just saying good jobs guys you know what if we get this job done by Friday noon we will take the rest of the day off with pay, let's bust our humps and git-R-done.
Or paying for lunch, things like that once in a while.
Of course you got to pay well and treat them good also.

Oh yeah and I want to know more about that book to please:thumbup:


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## JamesDibben (Apr 5, 2010)

I ordered my copy. I'll give it a read and start a thread and do a review.

I'm not the best book reviewer but I can at least say if I liked it or hated it. :laughing:


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## jimAKAblue (Aug 15, 2010)

*Pay is overated*

"Of course you got to pay well and treat them good also."

Surprisingly, money is NOT the most important thing that employees want!


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## thezoo (Sep 13, 2008)

I agree with alot of thoughts here. One thing I haven't read mentioned clearly is how employee communication is handled.
Do your guys know what is expected?
How their performance is judged? Annually, qtrly, per project, per job and such?
What goals are they striving to attain or exceed?
What their salary is based on?

I do know one thing for sure in companies who blow smoke and pretend annual reviews for annual compensation increases:
no employee performs above unknown expectations....

I worked for a bank where it was clear that annual compensation was comprised of base salary+unguaranted annual bonus therefore setting the standard employee performance expectations. exactly what is in your job description.

Everyone is motivated by something, find what your guys motivation is. I knew a plumber who loved his job because he got the work he wanted, no service- new work only. He could've made way more money but both Employer/ee where pleased.
Other people are more interested in being on the inside of management, having the workings of the company (not financial)...it gives them a sense of self worth being trusted that way.

For those people who complained about last years bonus level, surely that was clearly reported quarterly that the profit wasn't happening? Noone works in a vacuum right? The bank was very clear on that note, lol. Still, never heard anyone refuse the bonus


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## DT Builders (Aug 19, 2010)

Thanks for all the input boys


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## FRAME2FINISH (Aug 31, 2010)

buy them tools as you see fit and you can write them off, win win


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## jcalvin (Feb 1, 2008)

In my opinion, I can't succeed if my employees don't strive to succeed themselves. I don't give bonuses or incentives based on x% of early completion or anything that can be calculated. At random times through the year when I see something that my employee needs or wants and can't quite get for themselves, it shows up. Unexpected. Kind of like christmas. I like others have tried bonuses, and they don't work. They do expect it and they do remember how much last year's bonus was and they do expect inflation.


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## fireguy (Oct 29, 2006)

One problem with a bonus is work quality suffers. Then, you have to pay for the repairs. 

I have found a dinner at a nice resturant helps. Sometimes it is for the whole family. Sometimes I will call the wife, tell her to take her husband to a fancy place. I call ahead and have them put it on my card. One employee was very involved in his church. I bought the first tank of fuel for 2 vans to haul kids to a church mission in Mexico. I won twice, once for the employee and once because the church is an account. The reward may be because of an exceptional job, or long hours to complete a job or because of a profitable sale.


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## davy crockett (Dec 19, 2007)

cold drinks on the really hot days, hot drinks on the really cold days, a new pair of painter whites, a trip to a pro show, lunch on a slow day, day off after a hard week, $20 when payday is ways off and you know the guy would never ask(not to the mooch whose fired and don't know it) and maybe just an attaboy when the day is gloomy,,,,,,All random of course and if you can't share the love with em once in a while get rid of em and work alone cause life is too short to always be thinkin "go sit in the truck, I'll get it done":clap::clap::clap:


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## getthewheelsinl (Sep 5, 2010)

JamesDibben said:


> Great content in this thread! Plenty for everyone to consider!


Totally agree! Need to implement some of these ideas myself!!


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