Performance Pay Questions

Contractor 20/20 Offers Great Advice on Performance Pay

Performance pay questions have been a topic of discussion for quite some time and this article sheds light on how to handle this matter. Contractor 20/20 does not try to dictate how you should bonus your employees, but we will provide guidance on what has and hasn't worked.

Posted by Ryan McLean

In 1999 when we went to flat rate, I devised a performance bonus pay plan that worked great for a service/repair company that sells some replacements. We used it with great success for several years and actually set it up in more than six different companies across the country. Company profits went up but tech pay was also up. That scares some contractors when they think "techs are making too much." I left here for 3.5 years and came back to a company that was operating much differently and was not profitable. I struggled for a couple of years to get things back on that track and finally gave up. What happened is that we have become a maintenance and replacement company more than a service/repair company. Service does not appear profitable on paper here. The reason is that we are very good at setting leads when there is an issue on a system. Under the performance bonus pay plan the tech could do equally as well whether he did a repair or set a lead.

Now we pay hourly at the top or close to the top pay in the market, plus, they get bonuses and spiffs. Last month one tech had a $2000 bonus check from leads that sold. The techs make about $22 an hour but most make about $70,000 a year total with bonus and spiff.

The great thing about this system is that the easy way to see if a tech is doing well is to look at his bonus. When I coach a tech, the focus is on helping him make more money. "Something's wrong Jake, you had the lowest bonus this week. What can we do to help you make more?"

It has changed the complexion of the department. They are competitive but not adversarial. We post leads on the board and they hate to see someone get out in front of them. More leads by one fosters more leads by all. To manage a tech on profitability seems self defeating since they are not in charge of setting prices or managing work they have no control over. If they make the numbers, pay them. If your prices are wrong, change them. If a tech is not working out in the system and is not responding to coaching, he needs help finding a new job. Send him to a competitor.

We pay:
Good hourly wage, plus $20 per lead (if set while he is there and run by Salesman), and approximately 3% bonus if it sells by salesman. If they sell it directly they don't get $20 they just get the 3%. There are spiffs of $5-$20 on media filters, attic tent, Zerol ice, and about 15 other items. For what it's worth, our tech's average equipment sale last year was $5800 and the salesman was $8600.