We are approaching the time of year when the subject of bonuses comes up. Your construction employees might be saying, “Do you suppose they will pay us a Christmas Bonus this year?”
Here’s my stand on bonuses. If you work for me 8 hours and I pay you for 8 hours, we are even. I don’t owe you, you don’t owe me. Just because an employee shows up for work every day it does not mean they are entitled to extra pay.
I have heard some say that you have to pay a bonus if you want to get and keep good employees. I have visited the offices of some of the best contractors in North America this year, and they don’t pay bonuses unless it’s earned.
And that’s what a bonus should be – earned. If you pay a bonus, never call it a year end bonus, Christmas bonus, quarterly bonus or any other tag that makes the time frame a condition of the bonus.
Try something like this:
Stone Construction Services will pay any salesperson an extra 2% bonus on any lead that is generated and sold by the salesperson.
Or another possibility:
Stone Construction Services will pay any employee working on a given job that makes at least 42% gross margin, a bonus of 40% of any labor savings on the estimated labor amounts, equally divided among all members of the crew(s) working on that job, providing there are no customer complaints or job delays caused by company staff working on that job.
These are just two examples, and the wording needs to be cleaned up and defined as you see fit. However, notice that there is no time frame involved.
Your bonus policy needs to be in writing. If you want to enable employees to earn extra money and provide an incentive for performance, I’m good with that as long as the game plan is clear, in writing, discussed with the entire staff and everyone is on the same page. Part of being clear is that the plan is read out loud to the group, they are asked if there are any questions about the plan and the written plan is inserted into their employee folder or manual, complete with times and dates and witnesses.
When you pay a bonus with a time frame, you leave yourself open to a claim that bonuses are a company benefit. If you paid a bonus last year, but can’t afford to pay one this year, somebody may complain to the State Department of Labor and Industries and now you have to deal with them. Save yourself the grief. If you want to pay a bonus, do it, but make it a written policy. And, in my opinion, base it on performance. That is what you want to reward.
The knowledge and experience Michael Stone gained in his 60+ years in construction has helped thousands of contractors improve their businesses and their lives. He is the author of the books Markup & Profit Revisited, Profitable Sales, and Estimating Construction Profitably, and is available for one-on-one consultations.
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