Bob Ender, co-owner of DreamMaker Bath & Kitchen, in Ann Arbor, Mich., used to pay a salary to production managers and an hourly wage to production staff. But, he says, “We were always bleeding labor.” So Ender created a commission-based system that meets local labor laws and helps raise company profits.
To develop the system, you must be willing to plan, track labor, and make changes. You’ll need job descriptions and labor benchmarks.
Salespeople are paid 100% commission when a job is signed. There is a post-job review and the possibility of an income adjustment.
The production manager gets a base salary plus a percentage of monthly gross revenue. “The more volume he can run through the month, the greater his commission,” Ender says.
Two lead carpenters are paid an hourly rate plus a commission based on work type (they also do painting and tiling). LCs are given a set of hours to meet at their base pay rate. For example, take a $4,000 lump sum labor price divided by the 100 hours it should take to do a job, multiply by a $20-per-hour labor rate, and the employee earns $2,000. If he completes the job in 90 hours, he gets $1,800 plus a $200 commission. But he has done the job in eight days instead of 10. Now he can move to another job and the possibility of earning more money over the year.
For change orders, sales bills the customer or approves additional hours. If an adjustment is needed on the back end, the salesperson may take a hit.
The carpenter’s assistant has two labor rates: a company time rate and a $2-per-hour premium for field work. The incentive works like this: The LC gives the CA a task and “x” hours to get it done; he wants to minimize the CA’s time, while the CA wants to work hard so an LC will use him more. “It motivates guys to train the assistant, and the assistant wants to improve,” Ender says.
Prior to closing out, the LC walks the project with the client. They both sign off on outstanding issues. The clock ticks until the LC completes the work.
Anything found afterward is fixed — usually by the same LC for base hourly pay only — under a warranty process.
When the program first began, some staff were skeptical, but now all are onboard. “It’s a win for the company because if they pull a job two days ahead, we make the same amount but we gain extra time,” Ender says. “It’s more efficient and, at year end, it adds to the bottom line. So far this year, we’re within half a percent of budget.”
—Stacey Freed, senior editor, REMODELING.