At our company, we believe in rewarding efficiency and hard work. That’s why we’ve implemented a performance pay system designed to benefit both our production workers and our business. Here's how it works:
How the Performance Pay System Works
Our production workers are paid hourly, with additional compensation for overtime. To incentivize efficiency, we set a labor budget goal based on a percentage of the project cost or the linear/square footage of the installation.
When workers cut out inefficient behaviors, such as making unnecessary stops or excessive cell phone use, they not only contribute to the project's success but also earn more money. By staying focused and working efficiently, they can complete jobs faster and within the budget, directly increasing their take-home pay.
Example: An Install Crew on a $10,000 Job
Imagine an install crew working on a $10,000 project. Here's a step-by-step look at how our system would work in this scenario:
1. Setting the Budget Goal:
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- For this $10,000 job, we allocate a labor budget goal, say 15% of the project cost. This means the labor budget is $1,500.
2. Hourly Wages and Overtime:
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- Workers are paid an hourly wage. For simplicity, let’s assume each worker earns $20 per hour, with overtime paid at 1.5 times the regular rate.
- Suppose the job is estimated to take 75 hours of work (10 regular hours/day over 5 days + 25 hours of overtime).
3. Encouraging Efficiency:
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- By reducing inefficient behaviors, the crew can complete the job faster. For example, by eliminating unnecessary stops and minimizing distractions, they might complete the job in 60 regular hours and 15 overtime hours.
4. Calculating the Earnings:
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- Before Efficiency Improvements:
- Regular hours: 50 hours x $20/hour = $1,000
- Overtime hours: 25 hours x $30/hour = $750
- Total earnings: $1,750
- After Efficiency Improvements:
- Regular hours: 45 hours x $20/hour = $900
- Overtime hours: 15 hours x $30/hour = $450
- Total earnings: $1,350
5. Performance Pay Bonus:
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- With the job completed under budget (saving $150), the crew earns a performance bonus, say 50% of the savings. In this case, each worker would share a $75 bonus.
Benefits for Everyone
- For Workers: Higher earnings through performance bonuses and less time spent on the job.
- For the Company: Projects completed more quickly and within budget, improving overall profitability.
Interested in implementing Performance Pay? UnisonWorx can show you for free!
