Paying your employees commission

[Old Shoe]

Yes I tried this. A buddy of mine who owns an auto body shop talked me into trying it.

What I did was set labor budgets for each job. For instance, an apartment complex we maintained had a budget of 32 manhours per visit. Within this 32 hours we had to mow, edge, weedeat, blow, spray bed weeds and trim 1/4 of the propety's hedges. What I did was pay the crew $320 to service the property. The $320 was divided equally between the crew. The foreman got an additonal $150 per week.

If they got the job done in 20 hours, they got $320. If they got the job done in 50 hours, they got $320. If they did an unacceptable job, they went back for free. It was a very interesting, profitable and frustrating summer.

The good side - Their productivity went up, way up. They were able to complete more work within a week's schedule. The more properties they did, the more they made. Most people were making between $500-850 per week.
I didn't care how long they took for lunch, how long they stayed on a property,how much time they spent in the truck driving between jobs, my costs were fixed. If a crew member was late, they left him, getting the split the 320 between 4 people instead of 5. If someone was slacking, they took care of it because it was taking money out of their own pockets.

The bad side - I spent most of the summer having to explain over and over to the crews that this was better than hourly wages, their income potential was set by themselves not 40 hours per week. Even though they saw the difference in their paychecks, they thought I was pulling something over on them and they couldn't figure what it was. Finally, I asked them to make the decision, commissions or hourly wages. They voted for hourly wages. Within two weeks their productivity was down and so was their paychecks.

I still beleive that the commissions would work, I didn't sell them correctly on the idea.

[Team Gopher]

Hi Old Shoe,

That is pretty amazing! Have you considered maybe a hybrid concept of the two? Maybe have a base salary and then a commission some how? Would that help?

[Old Shoe]

The mechanics who work in a body shop usually work what is called piece work. They look up how long it is supposed to replace a quarter panel on a particular car and that is what the owner of the business uses when he give you an estimate. For instance, say the book says it will take 4 hours to take off the quarter panel and install a new one. The mechanic is paid $40.00 to replace the quarter panel whether it takes him one hour or five hours. If he does it wrong, he has to make the repair at no income to himself.

In fixing your car, 3-5 people may actually work on it, mechanic, body man, prep, painter etc. They are all paid based on the hours estimated for their particular job.

I opted for the easy way instead of paying one guy for the rider, one for the walkbehind, another for edging, weedeating, blowing, pruning, hedge trim, spraying and hand weeding. Lump all of the tasks to be performed into a total hours for the job/ divided equally by the people who do the work.

As an owner, your contract now has a fixed cost. No mater how long it takes to do the property, your labor cost is still the same. I don't care how long they take to do the property, just to do it right. The hours/dollars they were paid for the job were based on the man-hours I bid the job at, and were an accurate estimate.

As an employee, you want to make more money. Usually, you do this by slowing down so you work more hours and get some overtime. Working on commission, the amount of money you earn is based upon how efficient and how well you do the job. Do I want to make more money today? then Just get an extra job done. Want to take it easy? Just coast.

I had this one particular property for 11 years, and it took 32 hours to service it in the summer, without anyone killing themselves. When they decided to coast, they would do it in 40 manhours, and make a little overtime. On commission, they did it in 24 hours.

Let's look at the math: 7.50/hour X 8 hours = $60.00

$320 / 4 men = $80/man. $80/6hours = $13.33 per hour. And they had time left in the day to do another smaller property, bringing their daily earnings up to $120/day.

Before I did this, I checked with Wage and Hour, and they said they didn't care how I paid them as long as their earnings equaled more than minimum wage.