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#157935 - 02/25/06 04:41 PM Profit Sharing?
PE&Master Offline
Member

Registered: 02/25/06
Posts: 138
Loc: TX, USA
I'm a master electrician and own a small business with 3 service trucks, 3 JW, 3 apprentices, and a part time admin for book keeping. About half the sales each year is from service work, the other half from new or remodel commercial work.

I'd like to have the employees take more interest in the profits and the only way I see to do it is to offer them some. I have heard of contractors paying a fixed hourly rate and allowing the employee a percentage of the sales (maybe 20%). Granted sales is not profit but it's a number that is seen by the individual collecting the money.

The average hourly pay rate for a JW here is $17.00. Service work rate is $80/hour plus materials.

If the JW was paid $10.00/hour and got 20% of a days collection of at least 4 billable hours $320.00/day time 20% is $64/day on labor only. This amounts to $8/hour from sales. He'd make $18.00/hour.

Similar concept on a bid job, such as a scheduled service replacement. A 200 amp service changeout in this area is between $1500 and $2300 (depending on where the old panel is, one story, two story, u/g or o/h feed). You'll have $800 to $1300 in materials. For arguments sake, say there is $700 after buying the materials, at 20% that would be $140.00 more than his base $10/hour pay, provided it was a one man job. If he did it in a 8 hour day, he'd make $30/hour,$10 from his base pay and $20 from sales (less materials cost). If it took 16 man hours, he'd make $18.75/hour. Good incentive to finish it quickly.

Sorry for the long post, but does anybody have any experience with incentive based pay and would you sign up for this?

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Business, Office, Estimating, Legal:
#157936 - 02/25/06 08:51 PM Re: Profit Sharing?
Radar Offline
Member

Registered: 04/30/04
Posts: 349
Loc: Los Angeles, CA
Most profit sharing plans I've run accross are year end types, like bonuses based on profit calculations. Auditable calculations.

One small contractor I worked for years ago always wanted to start a plan like this, but every year he said he lost money, and if he started the plan then, our share would be a negative (we'd own him moeny). This happened every year. Somehow he never gained any credibility with the crew.

Radar
_________________________
There are 10 types of people. Those who know binary, and those who don't.

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#157937 - 02/26/06 12:51 PM Re: Profit Sharing?
Active 1 Offline
Member

Registered: 02/22/03
Posts: 684
Loc: Grayslake IL, USA
I never worked for a proffit sharing company. I had something like what you say that was called a bounis plan at some places.

Your idea is intresting. I wonder if your help would think of it as more of a pay cut. They are taking more risk of making less money. You would have less risk of loosing $ on a job. Would the employees have a negitive attitude for doing non-productive work like material handeling, driving, and cleaning? I is possable it could affect quality or even bad judgments as far as making something right. What happens if there is little work for a few days?

I can say from experiance it can lead to anger if the workers feel the job should have sold for more even if the price was fair. What will their attitudes be if you underbid a job? Maybe mistrust as far as costs involved and what the real proffit was.

I can think of other situations but it can all boil down to they may only want to do what pays them well and avoid the rest. Sometimes small things should be done to make it right and keep the customer happy.

If they get paid time off do they only get $400?

You would also have a lot more paperwork. When is the extra money paid? Is it when the work is done or when you got the money? What if you never get paid?

If their thinking they got shorted they could contact the labor board or go to court and make you prove the proper amount was paid on each ticket for the last ...?

Ok so maybe if you scale down your idea it might work better. What about keeping their pay the same but instead of a pay raise but them on a bounis plan. Something simple like 1% of work billed or accounts recieved. More or less depending on your numbers and maybe there skill level.

Let us know what happens

Tom

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#157938 - 02/26/06 04:42 PM Re: Profit Sharing?
LK Offline

Member

Registered: 01/21/03
Posts: 1721
Loc: New Jersey
"I have heard of contractors paying a fixed hourly rate and allowing the employee a percentage of the sales"

And these are the same contractors, trying to get someone to work, as an independent contractor, offering them a small wage, and a big percent of inflated sales price, nice way to make a fast buck, bad way to build an ongoing business, in most states this mode of operating is illegal.

I think, the best way to set up profit sharing for a small company, is to have it managed by an outside source, you may pay a small fee, but it will provide the best results for all concerned.



[This message has been edited by LK (edited 02-26-2006).]

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#157939 - 03/01/06 06:02 AM Re: Profit Sharing?
PE&Master Offline
Member

Registered: 02/25/06
Posts: 138
Loc: TX, USA
Thanks for the candid responses.

In a broad sense, we are all contractors, even employees of contractors are in fact contractors though they may not think so. We all exchange time for money and can be replaced tomorrow. The difference is the business owner takes the risk of non-payment or loss of profit in exchange for the challenge and opportunity of owing your own business. 98% of businesses fail in the first five years.

In general, workers in the South (Texas) do not have the work ethic or training of other parts of the country. I was trying to come up with a program to get some initiative on the part of the employee. I have decided to terminate the employee instead, hoping he will find a job better suited to his pace and abilities.

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#157940 - 03/01/06 06:28 AM Re: Profit Sharing?
Tiger Offline
Member

Registered: 05/04/05
Posts: 714
Loc: Crystal Lake, IL USA
I'm doing my best to understand the concept of profit, then I'll think about sharing it.

Dave

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#157941 - 03/05/06 12:23 PM Re: Profit Sharing?
japeters Offline
Junior Member

Registered: 02/14/05
Posts: 1
Loc: San Francisco, CA, USA
My part time CFO says that employees are often not interested in thinking about the details of the company operation and therefore profit sharing. They just want to do their job and go home and not think about work until the next day.

But I still will continue to try various experimental formulas. The current best on is patterned after the "Lead Carpenter" concept.

[This message has been edited by japeters (edited 03-05-2006).]
_________________________
John A. Peters (415)509-3599 9A-9P PST to chat.

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#157942 - 03/06/06 04:00 AM Re: Profit Sharing?
briselec Offline
Member

Registered: 12/28/05
Posts: 141
Loc: Brisbane, Australia
When we were doing a new shopping centre I really pushed the guys with lots of long days and weekend work and I could see it was starting to get to them. At the time wholesalers had just begun selling LED headlamps and they were fairly cheap so even though we didn't have a need for them I bought one for each guy. It was suprising to see how much a free "toy" from the boss improved their attitude.

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