Making the Switch from Hourly to Performance Pay in Your Home Service Business
Making the switch from paying your employees hourly to paying them on a performance basis can seem scary but will do wonders for your home service company.
In this article we are going to discuss the benefits of making the switch and hear from a few people that have already made it.
Paying your employees an hourly rate is what most every company starts with.
It is what we are taught from society, right? Get a job, make an hourly rate, save money and retire. That is the American dream as society would tell us.
What about getting paid for the amount of effort you put into your job? That sounds a little more fair.
It is also more fair to the business owner paying the employee.
If Bob is cutting 10 lawns a day shouldn’t he make more than Chris who only cuts 6 lawns?
Let’s look at the strategy of making the switch and different types of performance pay now.
Hourly plus Commission
The first type of performance pay is hourly plus commission.
This is where you pay your employee an hourly rate with a commission bonus based on metrics that you have predetermined and agreed on.
An example of this would be paying minimum wage, let’s use $10/hour, plus 10% of the job price.
Now if Bob works 8 hours and cuts $500 worth of grass he is making $130 for the day.
If Chris works the same 8 hours but only cuts $300 worth of grass he is making $110.
That seems a little more fair to all parties involved doesn’t it?
The other type of performance pay is straight commission.
This pay structure will quickly show you who the go-getters at your company are. They love this pay type while the slackers hate it.
For this example let’s say you are paying your employees a straight 20% commission.
If Bob hustles and completes his $500 worth of jobs in 5 hours, he makes $100 or $20 an hour.
If it takes slacker Chris the same 8 hours to complete his $300 worth of jobs he makes $60 for 8 hours or $7.50 an hour.
But let’s say minimum wage is $10 an hour, the company has to pay Chris minimum wage so they have to supplement his check with an additional $2.50 an hour. When the savvy business owner looks at these metrics he is going to make a data driven decision to find more go-getters like Bob.
Feedback from those who’ve made the switch
Tommy Mello, owner of A1 Garage Door Service, talks about the benefits of paying his technicians on a performance basis in his Amazon Best Seller “Home Service Millionaire” and on this episode of his podcast Home Service Expert.
Brandon Vaughn teaches how to implement performance based pay structure in his M.A.P.S Mastery course as part of the Conquer coaching program. He used this very pay structure to scale his exterior cleaning company All-Clean! from revenues of $8k/month to a whopping $450k/month in only 7 seasons! He then used the same pay structure to scale his floor coating company WISE Coatings from $0 to over $1M in revenue in only 1 year.
In conclusion, using a performance based pay structure motivates employees to get more done in less time and meet the quality metrics that the business owner has set so that they can make more money and get home to their families earlier. It is a win-win for everyone. So quit reading this article and get out there and implement performance pay for your company.
Comment below if you’d like more information about any of the metrics mentioned and we’ll respond 🙂
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