How to Pay for Performance in Lawn Care
Pay for Performance might be the easiest, simplest, and most profitable way to pay your lawn care employees.
Imagine if your own employees cared about the success of your business as much as you do. How hard would they work? How hard would they try to satisfy each client?
Pay for performance solves a ton of problems you commonly see with hourly wages, and it can motivate your employees in ways you never thought possible. But changing your compensation can be an intimidating process. We made this short guide to help you figure out:
Is pay for performance right for you?
How do you implement it?
What should you watch out for if you switch?
What is Pay for Performance?
Pay for performance is a compensation program that pays your employees based on their performance on each job. The most common strategy is to pay employees a percentage from each job they complete.
Let’s say two of your employees finish a $1000 job. Split that revenue down the middle and each one is responsible for $500 of work.
You could pay them an hourly wage … which incentivizes them to take as long as possible. They don’t even care about doing high quality work, because they get paid based on time—not performance!
Or you could offer them a 30% pay for performance: each employee would make 30% of their piece of the job, which means they get paid $150 each. This incentivizes them to get the job done quickly and to get the job done well, if you set up this model correctly (I’ll show you how to do that in a moment).
This model works like a charm for the lawn care industry, but with minor tweaks you can adapt it to installation, landscaping, and every other repeatable job type your business offers. It will also help you raise your prices, because you’ll be putting out better quality work.
Why Pay for Performance Works So Well
Hourly wages incentivize employees to do the bare minimum, and to milk the clock. If you’re constantly checking up on your crews because you don’t trust them to do the work, pay for performance might be a great tool for you.
Pay for performance empowers your employees. It incentivizes them to do great work, fast. It also helps them feel responsibility over the success of your business, because the more you succeed, the more they get paid. And everyone wants to make more money.
Your employees also gain a little more power over their own schedules, because the only metric that really matters is this: are they completing good work on schedule? Because they get paid for finishing work, they tend to waste less time and feel more refreshed because they aren’t wasting their own hours.
Is Pay for Performance Legal?
In most states and many countries, pay for performance is legal. However, it is always your responsibility to know your local labor laws.
Regardless of your compensation model, your employees’ wages must always equal or exceed the minimum wage rate. So make sure you set your pay for performance percentages high enough to account for that—and watch out for any underperforming employees.
And remember to abide by your local overtime laws, too!
How to Implement Pay for Performance in a Lawn Care Business
First, you need to figure out how much you’re going to pay your employees. Let them earn a percentage of the revenue from each job, as this is the simplest way to do it, and it makes it easy for your employees to understand how much they’ll get paid—which is critical, if you want them to get excited about this change. This method also allows you to scale your employees and their pay as you grow to that $100,000 mark.
What percentage should you pay for performance?
Start by looking at your average week across each season. Find out how much revenue you make. Then, find out the percentage your employees are currently getting paid, based on their hourly wages.
Here’s a simple example:
One employee works 40 hours in a week, and gets paid $20/hr. In one week, he completed 25 jobs that totaled $3500 in revenue.
40 hours x $20 means your employee earned $800 in wages that week.
$800 is about 22.9% of $3500.
Thus, your employee made about 22.9% of the revenue on each job.
So, if you offer to pay your employee a third (33.33%) for performance on each job, they’ll see a nice pay bump—and you’ll see a nice performance boost, meaning more jobs completed and more profit for your business
You Must Make Compensation Clear and Simple
Commonly, we see pay for performance numbers at 25%, 30%, and 33.33%. You must know your own numbers to see what’s feasible, and you need to make it clear and simple how much your employees will be paid for each job ahead of time. Don’t play games, and don’t make them do too much math. The easier it is for them to understand (and to see how much more they’ll get paid for finishing faster), the harder they will work.
What About Callbacks?
When a client complains about the quality of work, you need to call your crews back and redo the job, or else you’ll tarnish your reputation among other risks.
Callbacks are bad, but they are sometimes necessary, especially when your employees work too fast. The goal is to disincentivize callbacks.
Often, we see lawn care companies revert to hourly wages for callback jobs. If an employee was on the job, they need to be on the callback—which means they won’t earn that sweet performance boost. This will help them understand that the job must be done right the first time, in order for them to maximize their paycheck. Most of your employees will figure that out pretty fast, and they’ll do more to execute their highest-quality work.
Conclusion
Pay for performance, when implemented right, works wonders for employee motivation and your lawn business’ bottom line. It can help you keep employees invested in the success of your company—because your success means their wages go up.
This compensation model requires that you know all your costs: labor, equipment, and overhead. You need to know how much your jobs make, and you need to run the numbers before you switch. But the rewards can be great, and long-lasting.
If you switch, make sure to outline the rules loud and clear for your employees, and keep compensation as simple as possible. The goal with pay for performance is to pay employees more for higher-quality, faster work. Do this, and you’ll win their morale and loyalty, and start growing faster than ever before.
Who knows? It might even help you grow a million dollar lawn business.
