Ask The Experts | How to Create a Compensation Plan For Your Employees
Deciding how to create a compensation plan often begins at two prevalent options: hourly wages with incentives and commission-based pay.
Hourly wages offer a stable income base while incentives fuel performance and teamwork. Simplified compensation tracking ensures transparency. However, this model might lack recognition for exceptional efforts and risk prioritizing speed over quality.
Commission-based pay directly ties earnings to individual performance, driving motivation. This approach is tailored for sales-driven roles, encouraging employees to secure more contracts. Yet, it can foster intense competition, leading to inconsistent income during slower periods.
The choice between hourly wages with incentives and commission-based pay depends on your business’s nature and roles. For consistent teamwork, the former might strike the right balance, whereas commission-based pay suits sales-oriented positions. Adapting your pay structure to your business strategy will foster optimal employee performance and contribute to your contracting business’s growth.
An HVAC contractor in Iowa asked:“What do you think is the best way for us to compensate our service techs and sales people? Hourly with incentives or by commission?”
Gary Elekes is serial entrepreneur with a passion for helping others become more successful by sharing what he has learned over the past 3 decades working closely with all facets of the contracting industry. In 2000, Gary moved into entrepreneurship and started his training and consulting business EPC. Today, EPC continues to support growth oriented businesses aspiring to reach 20% EBIT. He also designed the very first web based learning platform for the residential contracting industry, which acts as a support system for training and learning in HVAC and plumbing trades, and has over 5,000 subscribers.“Cracking The Code,” our weekly web series.
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