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A Smarter Way to Get Paid

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The majority of companies employ their staff on a time basis. The employee is contracted to work so many hours each week and is paid for each one of those hours.

The questions is....why?

Pay-for-Time versus Pay-for Performance

If an employee is employed simply to be somewhere and not have any other function then it may be understandable that they are paid solely on how many hours they are there. A few - very few - examples come to mind: perhaps a security guard who simply reports what he or she sees or is simply there as a deterrent to would-be thieves; perhaps somebody who is employed to monitor how many cars pass through a particular junction. Hey, wait a minute, surely the security guard needs to look smart and have his or her top button fixed; the car-counter must ensure that an accurate record is being kept?

Well, the more enlightened companies tend to pay on a mixed basis with time still being the main element and quality elements such as smartness or accuracy, for example, being used to top up the salary. However, with many jobs should this be taken one stage further? Surely most companies want their staff to complete the tasks they have been set? Many jobs are not directly dependent on the clock at all. They are more dependent on getting the job done. Admittedly, a call-centre salesperson may be tied to their desk (some might say chained!) for a fixed period of time. Yes, they have tasks to fulfil, but they are governed largely by the clock. However, the labourer, electrician, plumber, postman, sales manager, buyer etc etc are largely judged on getting the job done. Why shouldn't a fast postman, for example, be allowed to go home early on full pay - if they have completed their round? By the same token, shouldn't the slow postman be made to stay until the job is done, without any extra pay? Further still, shouldn't the fast postman be permitted to carry out a second round in one day and double his pay? Of course I have simplified the argument to make the point. Many postal organisations do have a policy of paying for the round (or perhaps paying according to how many letters are posted) - but many do not. Why? Why are so many companies paying on a time basis when this does not fit the goal of the organisation? Take builders. If a house could be built simply by having a load of builders turn up on time and stay for 8 hours each day then house building would be very easy indeed. No, builders should surely be paid for their productivity. Turning up for 8 hours a day doesn't really come into it.

Speed versus Quality

I think I partly know the answer to my own question. I have omitted quality, of course. Take builders. Just being fast is only part of their job. They also must work safely. Skilled builders must do a quality job, not just hit the deadline. The postman must post the letters to the right addresses: if he tries to squeeze in an extra round he may not achieve this in the rush. Because this balance must be struck in most jobs - the speed versus quality balance, it is easier for companies to simply pay on a time basis, and manage staff within that framework.

Too Complicated - Too Difficult

Isn't this laziness on the part of employers? Wouldn't is be better to analyze each job and work out the best way to pay staff. Surely the salesman's salary should be mainly weighted towards sales with minor weighting given towards administration, keeping up corporate policies and image etc. Shouldn't a labourer's pay be weighted with safety record at say 55% and productivity at 45%? And what about our postman, wouldn't it be better if his pay rewarded quality and speed in roughly equal measure? No, say many employers, this would not be better, it would be very complicated. Speed could be measured fairly easily but quality aspects require judgements. There are bound to be anomalies and accusations of unfairness, say employers. It's simply easier to pay by time, make sure the staff turn up and then work on them.

I say that is the lazy approach. I don't accept that most quality measurements boil down to human judgement. Most measurements can be devised using established criteria, often simply based on mathematics.

Unfairness

It's unfair when a hard working member of staff is working alongside a lazy here-for-the-ride good-for-nothing waste-of-space employee and both are paid by time and both on the same rate of pay. That is surely unfair. While the bad staff stay bad and the good staff turn bad and demoralised, the SEO sits in his ivory tower saying that it is too hard to pay on performance indicators rather than by time alone while. Poor thing. Let's put the SEO on a pay-by-performance system and see if things change! Yes, let's take away his salary and give him a small chunk of the company. Now he is a part-owner, how does he feel about free-riders using up his money?

Progress

Pay-by-time goes back to factory work and sweat shops from the last century and the century before, when the machines kept running and the staff simply had to turn up and sew, or put this gismo into that gismo etc. Yes, there are still sweat shops around the world, but even many of them are more sophisticated these days with staff being paid on quality criteria. In fact, many factories are leading the way in pay-for-performance. I would say that it is in administration and even is some professional work where there is a stubborn lack of progress.

Chef Example

Take, as an example, a chef. I would class this as a professional job. Yet many establishments pay their chefs according to how many hours they have worked. OK, they may not clock on and clock off, but they will be expected to put in a week's work for a week's pay. As an illustrative example only, why not pay on this basis:

Weighting Aspect

60% Profit achieved

20% Michelin Star (or similar)

10% Health and Safety Record

10% Cleanliness and Food Safety Record

OK, the Michelin star element is a little ambitious for most restaurants, but there are equivalents at lower levels! The health and safety record speaks for itself: accidents can be banded into grades of seriousness. Cleanliness can be measured by having an outside independent agency, or the boss, if you like, carrying out random inspections against predetermined criteria. You see, as long as it's measurable, then a fair system of remuneration can be built around it. If the chef works for 90 hours a week to earn a decent living then, so be it (it may be worth his while looking for another job). If, on the other hand, chef has set things up so efficiently that he only needs to pop in for few hours a week to achieve his goals and therefore earn a good living then good luck to him! The business is obviously thriving and the chef deserves his time off. In this situation an ignorant owner might sack his successful chef and pocket the money for himself. Wrong wrong wrong again. If a manager, or any member of staff is paid for doing a good job, rather than merely turning up AND ends up doing just a few hours a week, then that employee is ready for promotion. I would say to the restaurant owner: hurry up and open another restaurant and get your chef running two so he can double his pay and you can get a healthy return.

Rabbits and Hats

Pay by time can be very unfair. Many staff quietly and conscientiously get on with their work and do a good job. They get ahead of the game, smoothing over future problems, removing barriers before they appear. Others are fire-fighters. They don't anticipate looming problems and hit them head-on, sometimes failing to solve them. Other times they dramatically solve such problems themselves and grab the headlines and become the hero. These are the people that get noticed. They put rabbits in hats and then pull them out again. They are the ones that get promotion while those that prevent problems in the first place go unnoticed. Now, with a pay-by-performance system, such fraudulent and unfair practices would be exposed.

Fly Killers

In our business we sell fly killer machines that use ultra-violet lamps to attract and kill flies. The ultra-violet emissions, that are the main attractant, degrade after about a year and the uv bulbs need to be changed. We also sell a gadget called a UV Light Tester. Those that are conscientious - who want to change uv bulbs at the optimum time - have purchased the u.v. Light Tester from us. They will not suffer from inexplicable fly infestation nor will they have their premises closed down by the Environmental Health Inspector. Those that buy this gadget would surely be paid well under a pay-by-performance system!

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