Retain Employees with Piece Rate Pay - Episode 308

The best way to retain good plumbing technicians is by paying well. And the best incentive pay type is piece rate pay. With piece rate, you determine the amount of time and money a job is worth. You charge the customer for that amount of time, and you pay the technician for that amount of time. You create more time, your techs are paid for more hours, your business sells more, and your customers appreciate the simple rate. Everybody wins!

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Resources

3 Golden Nuggets

With piece rate pay, you determine the amount of time and money a job is worth. That’s what you charge the customer, and that’s the number of hours you pay the technician. And it is the same for everyone.
Piece rate pay incentivizes your technicians to be more efficient with their time. They become more aware, more organized, and plan things better.
Piece rate is easier for techs to understand and easier for you to manage. It’s easy math. Payroll gets simplified.

Show Notes

Technician and Employee Retention Comes Down To Pay

(09:35) Let’s talk about retaining good plumbing technicians. We get them hired and on board. But how do we retain these guys?

There are all kinds of hoops you can jump through to try to retain them. We’ve jumped through all the hoops. We’ve given personal drivers, trips, and meals. We put in gaming systems, basketball courts, weight machines. These things are good, but it really all comes down to pay. Pay is the main thing for good staff retention.

Piece Rate Pay Is The Way To Pay.

(10:16) “What is the best way to pay my plumbers?” I get asked this question all the time. The answer is piece rate.

What is Piece Rate?

It comes from the auto industry. Auto dealerships make their money on servicing the cars. But there’s only so much room and only so many bays available to do the work. So, they figured out how to create more time by paying piece rate.

On piece rate, each particular job costs the client a certain amount and pays the tech a certain number of hours. That amount is exactly what you charge the customer, and that’s the number of hours you pay the technician regardless of the actual time it takes. And it is always the same.

(13:23) For example, a water heater fix is billed for four hours. You are selling that time to the customer, and the tech gets paid for four hours regardless of how long it takes him to do the job. He may get that job done in two and a half hours, but he still gets paid for four. And the customer still pays that total amount.

How Do You Do Piece Rate Pay?

You, as the business owner, determine the amount of time and money a particular type of job is worth. You get to decide the cost to the customer and the number of hours it’s worth for the plumbing tech.

When determining the number of hours it’s worth, you’re not making the time so short that the techs are trying so hard to get it done. You pad some time on it. Make it so that there’s plenty of time, and the technicians can really beat the time.

The plumber gets paid when they sell the job. When they go out to see the customer, they have to sell it. If they go out and don’t get the job, they don’t get paid.

Tip: When you decide to transition from hourly or time and materials, you’ll need to show your guys the benefits of piece rate pay. Keep track of everything for a month and show them what their earnings could have been had they been doing piece work.

Why Is Piece Rate Effective?

(15:21) It incentivizes the technicians to work more efficiently so they can earn more.

If they can get paid for four hours, but only work two, at $25 an hour they just raised their rate to $50 an hour. Therefore,

They plan better. They make sure everything they need is on their truck.
They don’t take unnecessary breaks or make unnecessary stops to the 7-Eleven.
They become more aware. They become faster and more organized when they are thinking about piece rate pay.
They don’t mind the difficult customers or the cold weather. They just get the job done.
The guys who just want to “camp out” on a job, don’t stay. You’re not stuck with them.

(20:38) It’s easy to understand and manage (for the technicians and for you).

Commission pay is complicated and has all these rules. Most guys don’t understand it, and it puts too much pressure on the sales part.
Piece rate pay is easy math. “I get paid $25 an hour, and you’re going to pay me an hour and half for that toilet.”
Payroll becomes as simple as running a report (try ServiceTitan). Break it down for each tech. Then just pay them on that. No tracking of materials or gas or other payroll deductions.
You don’t have to pay time and a half after 40 hours. If they happen to sell 45 hours in a week you pay them 40 hours at their hourly rate, then pay the extra five hours times their hourly rate as a bonus. There is no overtime.

Everyone Wins with Piece Rate Pay

(31:45) The technician wins because they are in control of their pay. The customer wins because they don’t have to worry about the tech lollygagging around. They just know the job will get done.

And your business wins!

No babysitting. With time and material and commission you’re having to babysit him and can lose money depending on how long he’s on the job.
You create more time. If I get my guys to move quicker, I’ll sell more to my customer. I’ve created more time. And time is money.
The customer isn’t paying for the time. They are paying for the resolved problem. You don’t make less from the customer if it’s done faster.

If your business is truly looking to make money, piece rate is the way to pay. And it’s a win-win-win for everyone involved.

Richard’s Call to Action.

If you want to learn more about numbers that matter and how to best run your plumbing business, why not schedule a free 30-min strategy call with us? Let’s talk about your goals and where you want to be this time next year, and we’ll help you create a path to make that happen. Schedule your free strategy call here today!