The 3 Ways You Can Pay your Team

by Tina on April 18, 2014

Alright folks, this one is longer than 3 mintues… but it’s juicy stuff that I get asked about A LOT so I had to make it longer.

Should you pay by the hour? A package rate? And what’s up with this incentive stuff?

There are 3 different ways you can be paying your team members, so let’s break them down here for you:

By the hour – paying someone an hourly rate for the TIME it takes them to do the work. This is the simplest arrangement as it’s the easiest to calculate, BUT the downside is that you have no control over how long it takes someone to do the work. Some people are fast, some are slow, and you run the risk of getting a “surprise” bill from someone when you don’t have parameters and strong agreements in place. Hourly is best for the “doers” in your business, such as a virtual assistant.

Pay for a package – this is paying someone a flat rate for a specific DELIVERABLE. For example, if you are hiring a web designer to create a new website for you and you have a clear agreement on what specifically they are going to deliver. The beauty of paying for a package is that you know exactly what you are getting, what you will be paying for it and it doesn’t matter how long it takes them to do the work. That being said, this arrangement is NOT ideal when there is not a clear deliverable or specific start/end to a project.

Incentive Based Compensation – this is when someone is paid a simple flat rate base (or retainer) amount with the option to earn more based on the RESULTS that they are helping to create in the business. This is ideal for the people on your team who help contribute to the overall growth and success of your business. A launch manager who is running a launch for you A to Z. An Online Business Manager who is responsible for setting the foundation for growth in your business. A sales person who is bringing new clients into your business.

The key to incentive is that the person has a bit of “skin in the game” – and that they don’t get paid more unless there is growth in the company (results). Again, hourly can be taken out of the equation here by giving the person a base/retainer that is enough to keep them engaged without having to track time and get caught up in the hours. Instead, they know they can truly make more money as the business grows and that the investment of time/energy on their part will pay off. Incentive can take the form of a percentage of revenue (5-10% or more in some cases), percentage of profits or a flat rate bonus based on reaching certain milestones.

  • Aine Dee

    Would love a workshop that focuses on the various ways to structure incentives and also deals with when you might offer stock ownership, which is one of my desires, as I age, to know which key team player may assume control of the work in the future.

  • Camilla Bignell

    I have to admit, when you taught this valuable topic in the OBM Certification Training I was a little uncomfortable with it; however, I forced myself to have those conversations and found that my ideal clients were quite open and willing to this process. It’s now become an important tool for me to determine if it’s a good fit for developing a working relationship with my potential client.

    Tina, any workshop you put together is worthwhile; I’m sure! Your knowledge and willingness to share, educate and coach is invaluable to the OBM and small business owner too!

  • Johnny

    I’m actively searching for an excellent OBM now for our growing business, and would like to set up base + incentive, so any workshop/more info about your ideas on this are most welcome.

  • Kym Hanna

    Hi Tina – pretty much how Aine worded it. I think it would be great to have a workshop/webinar or the like on this subject. I think it would also be great to have it as something that could be used as a tool to refer clients (existing or prospective) to so that they can hear it from someone else and hopefully warm to the idea of different payment methods.

  • LaToya Gay

    Good stuff. Enjoyed this valuable read!

Previous post:

Next post: