How to Pay your Field Service Technicians: Hourly or Commission or Both

Over the years, Fred’s Appliance has tried several different compensation models including hourly and commission.  One could argue the best compensation for both the employee and the employer is 100% commission.  The technician is directly rewarded for productivity. Entry-level technicians are sometimes able to produce as much, if not more than the seasoned technicians, and are able to reap compensation for same.  The negative to commission is the pay volatility. A new hire (and even a veteran) can experience wildly different pay week to week. This causes stress with your new hires, and that’s the last thing you want to do when investing in training.  

Another option is to pay your field service staff by the hour.  Hourly prevents pay volatility and stress. But, there’s no incentive for the technician to be productive.  This can inherently drive negative behavior in the field that leads to an unhealthy margin for the business as a whole which puts everyone at risk within the company.  In order for a company to be healthy, thrive, and provide awesome benefits, your team needs an incentive to be productive. Just providing a job is not going to cut it if you want top talent from today’s labor force.  

At the end of 2010, we realized that Fred’s Appliance needed to be more competitive with our field staff compensation while maintaining productivity and removing pay volatility.   We were fresh out of the recent recession.  This meant our entire team was seeking stability.

We designed a hybrid pay structure that includes a base hourly pay with a monthly bonus opportunity.  We feel this is the best of both worlds. This hybrid pay structure prevents pay volatility while maintaining an incentive to drive productivity.

The benchmark number is a total of $13,000.00+ of revenue in any particular month.  This benchmark only includes service call and labor. We do not include part sales in this calculation.  Including part sales to a bonus benchmark provides incentive to install parts that aren’t needed which is behavior that you do not want to drive within your team.  

Here’s our formula:

(Total Service Call and Labor) – $12,000 = X.   40% of X = Bonus for the month

Here’s some examples:

$13,454.50 Total Service Call and Labor – $12,000 =  $1,454.50.00 * .40 = $581.80 Bonus

$16,258.25 Total Service Call and Labor – $12,000 =  $4,258.25 * .40 = $1,703.30 Bonus

$12,594.00 Total Service Call and Labor.  Not eligible for monthly bonus, as the $13,000 benchmark was not met for the month.

We email the current month to date numbers everyday at about 4:50PM to the entire staff.  This drives competition and communicates to the entire team where everyone stands. Here’s a sample of what we email to the entire team each day.

As depicted in the sample above, you’ll see lots of good information we share with our staff each day.  You’ll notice we have 4 goals. We simply divide $13,000 into 4ths and set 4 goals throughout the month.  This allows for the staff to understand if they are on target week-to-week. The only goal that truly impacts eligibility for the bonus is the month’s end goal.  If they drive $13,000.00+ they are eligible for the bonus for that calendar month.

We also share the total number of completes and days off.  This helps our team understand the numbers better. For example, if a teammate’s numbers are very low, and they’ve had some days off, you can easily deduce why their numbers are suffering a bit.  This is especially helpful with trainees understanding the process as they are out in the field learning the ropes.

Our team also takes an average of all the technician’s bonuses for the calendar month, divides the average by 2, and each inside team member gets that as a bonus.  We offer this to our inside team as it’s imperative for the inside team and field team works together to truly drive productivity.

Just over 8 years later after initial launch of this bonus structure, our teammates are directly tied to our profitability and are compensated for performance.  It’s truly opened us up to a world of opportunity within our organization that directly attracts much needed talent. It’s a game changer for our organization and impacts every single team member in a positive way.

Interested in chatting more about our team’s compensation?  Feel free to reach out! We love to chat about the industry!

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