Compensation Question

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Paul Gagnon

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Good Morning , I operate a contracting business. I wish to change my employee crews from by the hour to by the job. I have an example below with real numbers but I cant figure it out. I want to make an incentive for more money than they are already getting for finishing on a timeline. Please help me.

Mr Jones signs a contract with me for $4000. 00. $2188 is labour and materials. Materials are $190 leaving $1998.00 for labour. The job is slated for 44 manhours. My 3 man crew breakdown is as follows:

- Crew leader - $35 per hour
- Employee #2 - $25 per hour
- Employee #3 - $20 per hour

I am assuming they all work identical hours however , if someone has a formula to figure out if one has a day off through the job , what will the percentages be on the other 2?

I would like to plug this formula into an Excel table with the Scope of Work to lay out the compensation plan along with a detailed Scope of Work.

Any help on this would be appreciated.

Paul Gagnon.
 
It's not clear what you are ultimately trying to compute.

Are you trying to figure out how much each employee gets paid for this job?
Are you going to initially let the labor budget assume equal hrs worked by all 3 employees?

Let's assume so for now. So you have a total labor budget of

[MATH]L = \dfrac{35 + 25+20}{3} \cdot 44 = \dfrac{3520}{3}[/MATH]
Let's then assume that the employees work [MATH]T_l,~T_1,~T_2[/MATH] hours each.

We can come up with a normalizing factor of [MATH]n = 35 T_l + 25 T_1 + 20 T_3[/MATH]
The employees would then get paid
[MATH]Lead = L\dfrac{35 T_l}{N}\\ E_1 = L\dfrac{25 T_1}{N}\\ E_2 = L\dfrac{20 T_2}{N}[/MATH]
 
Thank you for taking the time to write this out. I have miscommunicated myself as usual.

This is the problem that I am having and hopefully there is someone smarter than I am to give me a formula.

There is a pool of money , lets say $1500 for a job that takes 56 manhours.

I have John working normally at $35 per hour. - 43.75% of pool -35 / 80
I have Alex working normally at $25 per hour. - 31.25% of pool - 25 / 80
I have Dan working normally at $20 per hour. - 25% of pool - 20 / 80

This would be wonderful if they all worked equal hours but this is the real world!

Heres where my math is lacking ( I have been out of school for 45 years ) ,

John works 25 of those hours
Alex works 10 of those hours
Dan works 21 of those hours.

How big of a chunk out of the pool is each person entitled to? Without an excel spreadsheet to figure it out per job I wouldn't waste my time , however I want to encourage team work and beating the estimated hours on each job so I want to try this pay structure in 2021.

I appreciate any help you could provide.

Paul Gagnon.
Flying Colours Painting.
 
I'm still not entirely clear on what you want but maybe this works.

Let's again come up with a normalizing factor.

[MATH]n = (25)(35) + (10)(25) + (21)(20) = 1545\\ \text{we reduce each worker's hourly rate accordingly}\\ adjrates = \dfrac{1500}{1545} (35,25,20) = (33.98, 24.27, 19.42)\\ \text{and each worker is paid hourly using these adjusted rates}\\ (25 \cdot 33.98,~10 \cdot 24.27,~21\cdot 19.42) =\$ (849.5, 242.7, 407.8)[/MATH]
This is all very simple to do in excel.
 
Paul Gagnon said:
Thank you for taking the time to write this out. I have miscommunicated myself as usual.

This is the problem that I am having and hopefully there is someone smarter than I am to give me a formula.

There is a pool of money , lets say $1500 for a job that takes 56 manhours.

I have John working normally at $35 per hour. - 43.75% of pool -35 / 80
I have Alex working normally at $25 per hour. - 31.25% of pool - 25 / 80
I have Dan working normally at $20 per hour. - 25% of pool - 20 / 80
Click to expand...
Where did this "80" come from?



This would be wonderful if they all worked equal hours but this is the real world!

Heres where my math is lacking ( I have been out of school for 45 years ) ,

John works 25 of those hours
Alex works 10 of those hours
Dan works 21 of those hours.

How big of a chunk out of the pool is each person entitled to? Without an excel spreadsheet to figure it out per job I wouldn't waste my time , however I want to encourage team work and beating the estimated hours on each job so I want to try this pay structure in 2021.

I appreciate any help you could provide.

Paul Gagnon.
Flying Colours Painting.
Click to expand...
 
I thought breaking it down to a percentage of the pool based on their past pay structure would be important.
Again , this would work wonderfully if they worked exact hours.

Thanks alot for all the input.... Im going to stick to the pay structure of by the hour and offer bonuses on finishing early.... I think this would be an account / payroll nightmare if I implimented this.

Paul.
 
Paul Gagnon said:
I thought breaking it down to a percentage of the pool based on their past pay structure would be important.
Again , this would work wonderfully if they worked exact hours.

Thanks alot for all the input.... Im going to stick to the pay structure of by the hour and offer bonuses on finishing early.... I think this would be an account / payroll nightmare if I implimented this.

Paul.
Click to expand...

That's probably why you don't see it done. With hourly workers you pay them hourly at some agreed to rate. They are basically contractors to you at that point, they don't have any particular skin in the game of your business (other than continued employment), so they aren't interested in fielding slack if you screw up a bid, or if you are trying to build business by purposefully low balling bids.

If they are salaried, this sort of encouragement is what bonuses are for.
 
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