Trying to Establish a "Flat Rate" Pay System for My Employees

[On Time Services]

My question involves employment and labor law for the state of: South Carolina

We currently employ several hourly workers who perform a variety of jobs for us outside our office. We have a good idea of how long these jobs should take, having been in this business for decades, but are seeing the jobs take longer and longer.

We are trying to set up a flat rate system, similar to those used in Auto Repair shops, that would enable us to pay the men based on the work they perform, not how long it takes them to do it.

Can anyone steer me toward rescources that might help us set this up? Can anyone comment on the legality of this system in South Carolina?

Thanks for any help you can give me.

[cyjeff]

Odds are... you can't.

Very specific jobs are allowed to be paid as you describe. All others are paid on the basis of time.

Not time it takes but time on the job.... regardless of what they are doing.

[PattyPA]

I have to disagree with cyjeff here. I don't know of any LAW that would prevent you structuring a compensation plan as you describe, as long as you pay at least minimum wage for all hours worked and the overtime premium is based on the "regular rate of pay".

http://www.dol.gov/dol/allcfr/ESA/Ti...CFR778.112.htm

[On Time Services]

I know that in the automotive service business there are established rates, and that techs are payed off of those. Our plan here, assuming that we can make it work, is to work with our existing employees to determine "book time" for our regular jobs, compile them and have each employee sign off on it along with an explanation of the pay system.

Based on that link, is this right:

In a week, an employee works 50 hours. In that time, he completes jobs 'worth' 60 hours. 60/50 = 1.2 . (1.2*40) + (1.8*10) = 48+18 = 66 hours equivalent pay.

If the same employee worked the same 50 hours, but only did 40 hours worth of work, then 40/50 = .8 . (.8*40) + (1.2*10) = 32+12 = 44 equivalent hours.

Am I reading that right?

Thanks again for your help.

[PattyPA]

Boy, that sounds awfully convoluted to me. Do you have a dollar value as well as an exepcted hours to completion for each job? Or just hours?

[jk]

The system you propose invites shortcuts and less than best effort work...big time.

[cyjeff]

And what happens when there is no work for a particular person to do?

Are you saying you shouldn't have to pay them for showing up unless there is a job scheduled?

Are you saying you shouldn't have to pay overtime if the employee SHOULD have been done before that time?

[On Time Services]

@ PattyPA - It does seem convoluted, but if I'm reading the law you linked to properly, it's a fairly simple equation. We're considering both price-based (commision) and Flat-rate (hourly) compensation methods. Both are just in the conceptual phase right now.

@ jk - I hope that this sytem will encourage some shortcuts - so long as those do not negatively impact quality. I know, and try to pass on to the men, 'shortcuts' and easier ways of doing things, but the system we have in place right now seems to be encouraging working as slowly as possible and milking the clock. In any case, substandard work (we audit it) results in a job opening. I'm not trying to be callous, but my company has been in business for forty years, and has a reputation to maintain.

@ cyjeff - There is plenty of work for the men to do. I have heard that there is a recession on, but we (as of yet) have not received our invitation. On those (increasingly rare) days when there is not 8 hours worth of work for an employee, we pay him for 8 hours anyway. In our opinion, he has his day set aside for me, and I owe it to him to pay him for his time. I am not trying to pay my men less than they deserve, but need to make sure that the pay they are receiving is commensurate with the value they are providing. It does no one any good in the long run for me to pay more in overtime that I make for the jobs they are doing.

[jk]

@ jk - I hope that this sytem will encourage some shortcuts - so long as those do not negatively impact quality

.Oh it will. I have known too many mechanics at dealerships that work under this type of system to think anything different.

when I say shortcuts, I do not mean "more efficient methods". I mean shortcuts in the worst way possible.

. I'm not trying to be callous, but my company has been in business for forty years, and has a reputation to maintain.

and you are now attempting to employ a productivity pay method that you have not used before. From auto mechanics to workers in manufactured housing to many other areas, paying a person based on time spent on a job will result in time being more important than quality.

but hey, it is your company and you have been doing it in a manner that did not employ a quantity threshold for pay and doing ok. Why not try this? After all, all you have to lose is your reputation.

Best of luck but I have seen a quantity threshold do exactly what I am speaking of too many times but I bet they get that work done faster than you have ever seen anybody do it before. In fact, I bet they start getting things done faster than you calculated it could be done.

[PattyPA]

You might want to consider hiring a compensation consultant to design this plan for you.