Due in large part to these unpredictable economic times, it goes without fail that every week, I get several phone calls across the nation from intriguing green industry business owners who want conversation, guidance and benchmarking about employee bonus programs. Stated simply, with inflation raising wages beyond reasonable adaptation, business owners are thinking well beyond traditional wage increases to more variable pay programs (e.g., incentives, bonuses, commissions) as the solution that balances employee pay demands and threats of turnover with organizational productivity goals and thinning profit margins.
Mature dialogue regarding employee compensation issues must concurrently address various legal (e.g., Fair Labor Standards Act, state laws, EPLI Wage and Hour Add-on coverage), practical (e.g., internal, external and individual equity) and budgetary (e.g., production rates, gross margin goals, billable hourly rate) considerations. A vital aspect of bonus program design is that such programs should be viewed within the framework of vertical goal alignment, rather than as singular bonus plans aimed solely at mid-level management staff or sales employees.
Strategic by nature and capitalistic by design, the intentional hierarchy of an integrated bonus system must fixate employees’ attention onto common sets of interwoven business objectives based on related payouts due solely to achievement, eventuating in increased company value.
Circumscribed by company size, scope and success, here is the common, elementary bonus program outline I frequently recommend to business owners.
This position oversees a full work crew across multiple jobsites. The typical bonus potential for this position is 10% of annual salary. Thus, if this position earns $50,000 annually, the “typical” annual bonus potential would be approximately $5,000 per year. Standard bonus-eligible key performance indicators for this position include: job quality scores, crew member retention and meeting labor hour goals for the jobs in their portfolio. Keep in mind that foremen are traditionally non-exempt employees and as such, per the FLSA, any non-discretionary bonuses like those just mentioned have direct impact on the foreman’s regular rate of pay and subsequent overtime pay rate.
This operations position oversees multiple work crews across multiple job sites. The typical bonus potential for this position is 15% of annual salary. Standard KPIs for this position include: job quality scores, foremen retention, job retention, enhancements sales and meeting labor hour goals for their jobs. If this position is non-exempt, the same caveat mentioned previously for foremen remains constant; conversely, if this position is classified as exempt, no impact on the field supervisor’s salary is affected.
This external-facing position responds to customer needs by working with field supervisors across multiple work crews. The typical bonus potential for this position is 15% of annual salary. Standard KPIs include: enhancements sales, job retention and in some cases meeting gross margin goals for their entire portfolio.
This position has complete P&L responsibility for an entire business unit (e.g., maintenance, construction, enhancements, tree services or irrigation). The typical bonus potential for this position is 20% of annual salary. For example, if this position has an annual salary of $100,000, the typical annual bonus potential would be approximately $20,000. Standard KPIs include: enhancements sales, job quality, change orders, job retention, foremen retention and department gross margin goals.
This position has complete P&L responsibility for all field operations for an entire business location (e.g., maintenance, construction, enhancements, tree services and irrigation). The typical bonus potential for this position is 25% of annual salary. Standard KPIs include: branch revenue, job retention, foremen retention and branch net profit goals.
Beyond the scope of this field orientation, other bonus programs aimed at executive-level positions (e.g., general manager, COO, CFO) can attain 40% salary potential, though said position bonus plans are frequently complicated by unique myriad variables (e.g., deferred compensation, equity stake, perquisites) tailored meaningfully for each specific organization.
With reference to bonus programs, here are some key points to remember. Per OSHA, it is illegal to allocate financial bonuses based on injury incident rate. Next, bonus programs must be self-funding, premised on increased production rates, revenue per man metrics, gross margin rates and accurately estimated jobs. And finally, when in doubt, always make the bonus potential more lucrative rather than cost-conscious to further motivate achievement.
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