Pay it out

Benchmarking Your Business Report - Cover Story: Benchmarking Your Business Report

Whether it’s salary for employees or your slice of the profits, judging how to pay everyone on board can be tricky.

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September 23, 2021

© Beth Walrond

Figuring out how much to pay your employees – and, for that matter, how to pay yourself – can seem like a delicate situation. How much is too little for new laborers? When is it time to give someone a raise so they don’t jump ship and join another company? And how do you evaluate your own job performance to pay yourself accordingly?

These are complex questions only further complicated by a global pandemic. And as landscapers nationwide refitted their trucks and restructured their companies to adjust for safety protocols, they also had to make on-the-fly decisions about payroll.

“In March and April, I was very frank with my staff. We had a huge project – the biggest commercial job that, in 18 years, we were ever going to undertake,” says Benjamin Lewis, the president of Browder-Hite in Virginia. The project got tabled because the owners’ funding source backed away due to the financial implications of COVID-19. “I thought, ‘My goodness gracious, if this is the beginning of the year, I have no idea what this year will be like,’” he says.

For some, the adjustments were awkward – Lewis says his company enjoyed a great 2020, while at Clarke’s Landscape Solutions, Jonathan Clarke says he suffered a 30% loss in revenue. Couple that with crews who didn’t want to work, and he says the year resulted in a pay cut for everyone, including himself.

“I had to limit the amount of work I estimated, but my guys were paid consistently,” he says. “I just adjusted my pay accordingly.”

“There’s always going to be some subjective component, but we try to make (pay) as objective as possible, driven through data and numbers.” Paul Fraynd, CEO, Sun Valley Landscaping

Tightening things up

For Paul Fraynd, the CEO at Sun Valley Landscaping in Omaha, Nebraska, all the necessary COVID-19 precautions were put into place almost immediately. They closed for a day right around when the rest of the world seemed to – the tipping point for him was when the NBA started cancelling games. And when they quickly reopened, they had to be particularly careful around their clients as 55% of the work they do is residential, largely either design/build or maintenance.

Then, Fraynd implemented a pay freeze across the entire $6-million company that would later be lifted in July, so pay raises were temporarily suspended. Other perks for his 55 employees were also removed, including the complementary local zoo membership each of his employees enjoys.

But by the summer, Fraynd had a new plan in place: They reestablished a portion of the budget for pay raises and started divulging full financial information in monthly Zoom calls to the employees to be transparent. Between explaining that and asking for their input – they all collectively decided to keep pay raises over company parties, for instance – Fraynd says his company navigated the pandemic well.

“Honestly, people just want to go to work and feel safe,” he says. “We’ve built that trust by sharing the real facts. It helps when you’re not making promises you can’t keep. That part kind of bonded everyone, like if you go to war together. Obviously, we’re not in battle, but still.”

Meanwhile, Clarke says his residential hardscape company – made up of somewhere between three and seven employees – struggled during the year. He says many of his employees left to collect unemployment checks, leaving it more difficult to properly cut the checks. Those who did good work were rewarded even despite the financial hit his company took, Clarke says.

“If I can rely on them to show up and do proper work, and if they’re good employees and I want to keep them around, I’ll always pay them more,” Clarke says.

Credit where it’s due

Lewis says it’s rare his 20 employees, who all do either maintenance or irrigation, don’t earn some sort of financial incentive opportunities. His office employees earn a salary while his field workers are paid hourly, but he says the crews have some “skin in the game.”

When his crews still finish up early on a job – for example, working 89 hours instead of 100 – he’ll still compensate for the time they saved working efficiently.

“I’m not a hoarder. I’m not looking to keep every dime,” Lewis says. “I have a philosophy that my employees come first. I operate from a Biblical standard that says pay the worker what he’s owed.”

For Fraynd, pay raises can be awarded from a budgeted 3% of total revenue. As always, in 2020, he left it up to his supervisors on how the pay could be awarded – some crews started paying $1 more an hour across the whole unit, while others just handed $3 more an hour to the employee who made the biggest difference out in the field. It helps that they’ve established pay ranges for each position so they know the maximum someone can earn in each role – if someone wants to earn more than the $18-$22 crew mower earns, they must try and learn another role within the company.

And Fraynd monitors his competition to ensure they’re paying among the best in the Omaha area. He noticed a huge spike in pay rates five years ago, and as a result, they “planted their flag in the ground” and paid the most in town. Soon after, everyone else recalibrated as well, meaning he’s now trying to pay in the top 10 percentile.

“I struggle because I want everyone to raise up, but not everybody wants to. Some people are happy to make what they make, and we need those people, too,” he says. “With the employees, you generally get what you pay for.”

One for all

At some point, company owners have to assess how they’ll make money, too.

With his smaller company, Clarke says he determines how much he’ll earn based on how much remains after paying it out to his crew workers. And Fraynd says he’ll always make sure his employees are paid their proper dues first before deciding his salary. Just like how he assesses the success of his crews, Fraynd says he tries to score his own performance as a leader, taking a cut from the overall sales. It behooves him to press his employees to perform well as much as it benefits them.

“We either make the sales and have the work or you don’t. I think everybody’s kind of familiar with that,” he says. “There’s always going to be some subjective component, but we try to make (pay) as objective as possible, driven through data and numbers.”

But it can feel like a relatively subjective decision. Company owners might have a bias toward paying themselves too much, or they might shortchange themselves in the name of appearing like a team player.

Lewis says it helps to find a third party, such as a consultant, to help determine a company owner’s pay. He and his consultant meet in the late summer to plot out the next year.

“As a general rule, I’m paid a salary, and it’s generally a percentage of anticipated income through the year, and I also take draws on capital,” Lewis says. “If we don’t make sales in a specific quarter or failed to meet expectations, then I will not take a full-sized draw.”