How to Best Structure a Lower Flat Hourly Rate and Project Bonuses for Performance Pay?

A Contractor University Member recently utilized the Ask-The-Expert Q&A feature within the member dashboard by submitting the following question and received the response below.

Contractor Question:

“We are beginning the transition from an hourly pay model to performance pay, starting with our install team. After reviewing the performance pay module and taking lots of notes, we are leaning toward a lower flat hourly rate with a strong project bonus but are unsure of the best way to structure it — is there anything on the Contractor Portal that could help, or do you have a recommendation?”

Contractor University Expert Response:

“Here’s what we do:

For installs, we pay straight piece rate.

For service, it’s hourly pay plus a percent of the ticket.

For plumbing, it’s a percent of the ticket.

When it comes to installs, setting a monthly budget is key. Then, tie a bonus to beating that productivity target.
The real driver is days sold — that’s what matters most. Gross profit per day is the critical metric. Set a target days sold percentage for efficiency — say, 63%. Any gross profit produced above that budget becomes bonus opportunity for the team.
If it were me? I would stick with straight piece rate.
Why?
Paying hourly tends to incentivize slowing down or stretching projects into an extra day, and when that happens, you lose. It’s not the right triangle where the employee, the client, and the company all win together.”

Contractor University members can click here to log in to their member dashboard and submit a question through the Ask the Expert portal.