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

February 14, 2019
Appliance Repair

New Content Added: 9/9/2021

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 the 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.  

In 2010 we discovered that compensating our technicians with a hybrid pay structure that includes a base hourly pay with a monthly bonus opportunity prevents pay volatility while driving productivity. Over the past decade we have fine-tuned this unique structure by increasing transparency and accuracy.

Our model works like this:

The monthly sales goal is a total of $13,000.00. This benchmark includes service call and labor. We do not include part sales in this calculation as doing so could provide an incentive to install parts that aren’t needed which is behavior that we do not want to encourage.  

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 every morning to our entire staff. 

Our previous tracking spreadsheet looked like this:

It included the date, 4 goal benchmarks for the month, the technicians total sales and completes, and a tally of their days off. 

Our new tracking spreadsheet looks like this:

A few of the major changes:

Daily Goals:

Instead of breaking the month into ~1 week long quarterly goals, we divide the monthly goal of $13,000 by the number of working days to determine the daily goal.

For example, there are 21 working days in September 2020 (for us, excluding weekend days and Labor Day).

$13,000 / 21 working days = $619.05.

Our technicians know whether or not they are on track each day rather than each week. This keeps them on track and provides better transparency into their numbers. 

Taking Time Off:

Previously, our hybrid model posed a challenge for technicians who wanted to take time off. If you take time off, then you aren’t at work to increase your sales. We did not feel this was the right thing to do and we actually want to encourage our technicians to take time off for the things that really matter to them. We added a few elements to make this happen.

First, we split the time off columns into the “types” of time off: scheduled Paid Time Off, Training (i.e. time spent at work but without the opportunity to increase sales), and other (i.e. call-offs, unpaid time off).

To encourage our team to schedule and use their PTO as well as request additional training, we offer them prorated sales towards that day. The prorated amount is simply one day’s goal amount, which means their numbers will stay on track regardless of the days they schedule off. 

Current Bonus:

It’s exciting when a technician hits the monthly goal before the last day of the month. We made the bonus column live, so, once they hit the monthly goal, the bonus they’re taking home increases as their sales increase. We enjoy seeing the bonus value increase during the last few days of the month!

Support Staff Bonus

The Fred’s support team is also eligible for a monthly bonus based on the productivity of the field team and we have an equation for this, too. This ensures our team is working together to get our customers taken of as everyone wins financially across the entire team.

((Total bonus earned among all field staff this month) / (Total # of Techs)) / 2 = Bonus for each support employee

Using our example spreadsheet above:

((5,687.90 / 11)) / 2 = $258.54 for each support employee for this month

We calculate based on total number technicians including trainees.

Additional Incentives

Our sister company, Fred’s Appliance Academy, is currently working on enhancing its online course with material from real-life experiences in the Appliance Repair Field. We have offered our technicians a monetary incentive to submit photos and videos of common and rare failures that they see in the field. We added a column, “Pics”, to this tracker to encourage more submissions and as a subtle reminder that they can increase their bonus by participating in the program. We hope to continue to use this tracker as a way to encourage our growth. 

Our Daily Performance Tracker has evolved throughout the past decade just as our team has. This one tool incentivizes our technicians to be productive, to take advantage of training, to enhance an online training course, and to enjoy time off spending time doing what matters most to them.

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