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Use Compensation Systems, Not Bonus Programs

To Encourage Certain Work Habits or Behaviors, Many Restoration Business Owners Try to Implement a Bonus Program….

But I’m gonna let you in on a little secret: I don’t like using the word bonus when it comes to encouraging work habits/behaviors. I prefer to use the word compensation. And here’s why: When talking about bonuses, a goal is involved. A goal is set and if an employee reaches and exceeds that goal, then they get the bonus. It’s a reward for going above and beyond the expected level of work.

On the other hand, compensation carries more of the thought of what you give to an employee in exchange for the work they do for your business. There’s a difference in mindset behind these two words, and when it comes to using bonus vs. compensation, compensation fits the idea of reinforcing good work habits and behaviors.

Table of Contents

What are some ways to compensate employees?

Restoration business bonus program

 

There are 3 common ways companies compensate employees:

  1. The simplest, basic way is to pay an hourly rate and overtime.
    • This can be a somewhat ineffective form of compensation since it is simply paying for time, not necessarily for work product.
  2. A smaller hourly rate coupled with compensation that is activity-based.
    • We’ll touch on this further in this article and provide an example.
  3. 100% commission
    • The only thing about straight commission is you have to have a way of knowing that you’re exceeding the minimum wage. And you need to talk to your accountant to see if you are in line with overtime laws.

 

Principles for a Successful Compensation System

water damage profit

 

To determine compensation, figure out what your company makes money doing and find a way to compensate people for doing those activities.

 

  • A good compensation system is simple, not overly complex.
    • When the compensation program is simple, the person being compensated understands when and how they are compensated and are also motivated to do the activities needed to get compensated.
  • With a good compensation system, everybody wins!
    • With a good compensation system, you should be wanting to pay people. Why? Because if it’s working correctly, both the employer and the employee make more money. Create a compensation system that links your most profitable activities to something that the employee can control. If you’re paying someone a bonus/compensation for washing the truck, then you’re going in the wrong direction.
  • A good compensation plan is implemented within a specific time frame.
    • Make sure to set a specific time frame, such as 90 days. Don’t make it an indefinite arrangement. That way you allow yourself time to test out the system’s effectiveness. If it doesn’t work after 90 days, then try something else after the 90 days. If it’s successful, you can reinstate it for another 90 day and so forth.
  • A good compensation system is legal.
    • Make sure to run whatever compensation system that you are providing by your accountant. They’ll help you to make sure it’s legal in your area and is in line with your state’s labor laws. For example, you can’t put a water damage technician on salary because it is a labor oriented position. If you offer them salary, you are in effect saying that they cannot get overtime if they work over 40 hours.
  • A good compensation system has positive reinforcement.
    • Keep the compensation in the forefront of their minds. For example, if you are providing compensation that is activity-based, provide a visual in a common area. Have it on a white board, or a TV screen in the tech room.

An Example of A Successful Compensation System

water damage restoration business

So, for example, let’s say that your technicians are not providing documentation, and are not calculating/setting the right amount of equipment. This is a problem because you know you make money on setting equipment and completely drying buildings. If your technicians aren’t calculating and setting the right amount of equipment or providing documentation, then your company is losing money.

What’s one possible way to compensate a technician in a way that encourages them to provide documentation, calculate and set the right number of air movers?

Earlier in this article we mentioned 3 ways to compensate, one being paying a smaller hourly rate coupled with compensation that is activity-based. This could be a perfect fit as a way to compensate your technician by linking something that they can control with one of your company’s most profitable activities.

You could set up a compensation system that pays your technicians a lower hourly rate, coupled with compensating, oh let’s just say, $1/day per air mover they set.

In order to receive compensation, they would have to:

  1. Calculate the air movers per the S500 standard and show proof of their calculation and proof that they did use the right amount of equipment.
  2.  Provide drying documentation to show that they dried until the building was dry.

Download an air mover calculation cheat sheet HERE

Now, the problem is, you could have multiple crews doing all different types of things and everyone may not get the same compensation opportunities. Now what?

Well, one way you could do it is every month, track how many air movers and how many days were set total. In other words, if documentation was turned in, then put them into a spreadsheet that can track that. Then, once a month distribute that amount based on how many hours that each person worked on those jobs.

For example, let’s say in January your team set 400 days of air movers. So, based on the compensation rate of $1/day per air mover set, you know that $400 in that type of compensation goes into the system. If a technician worked 7% of the hours during that month, they would get 7% of that money.

A way to positively reinforce this compensation system is by having a whiteboard or TV in the tech room where they can see the spreadsheet and see what they can expect. By having a visual, you help keep it in the forefront of their minds.

Want a dry log that can be used on an iPad and help with your compensation plan? Come to our next Estimating and Negotiating Class!

Conclusion

Remember that compensations and bonuses have slightly different meanings. If you’re trying to encourage and reinforce good work habits, try implementing a compensation system. And when you do, remember these principles:

  • A good compensation system is:
    • Simple, not overly complex and easily understood
    • One where both employee and employer wins
    • Implemented within a certain time frame
    • Legal
    • Positively Reinforced
Jeremy Reets

Jeremy Reets started working in water restoration in the family business in 1990.  He is known as the innovator of the TES/ETES drying systems, a discipline of drying called Directed Heat Drying™ and the Evaporation Potential formula.

Jeremy opened Reets Drying Academy and flood house in 2005 to provide water damage restoration education.  Jeremy and his brothers also own Champion Cleaning Systems, Inc., a multi-million dollar water damage mitigation company that his family started in 1970.

In 2011, Jeremy began ReetsTV, a series of online water restoration training packages designed specifically for restoration company’s everyday needs, another first in the Industry. 

Today, Reets Drying Academy provides online training for water damage restorationmold remediationmitigation estimating and fire damage restoration.

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