Small business and employee bonuses

[QuirkyKapers]

Here is some background about a specific situation Dh is dealing with:

Dh owns a business and has run it for 23 years. Employee A has been with him for 13 years. Employee A doesn't feel he is getting enough money compared to dh as well as bonuses. He sees the company profits since dh can't think of a way to make this confidential due to the nature of work they do. He sees he isn't getting bonuses like my dh's. However, he rarely comes in at the time my dh has said. He works 35 hours a week, and generally uses vacation to make the 40 hours. (Dh had to take him off salary since he wasn't working 40 hours.) Dh aquired a new company that required lots of travel and away time. Employee A wanted to travel with Dh to the company but dh needed him handle the other clients. So, this resulted in more work for the employee. (Dh did tell employee he could handle new company but employee refused to travel by himself.) Since employee has more responsibility, he feels he should get a good bonus. Although, he still is only working 35 hours a week. Dh has been working over 60 hours a week and traveling. Anything my dh suggests, employee feels isn't good enough. Nothing has worked to motivate employee to actually work 40 or more hours. He feels he went back to school, and could only work 25-30 hours but even though he has done that, he still isn't making what he should. My dh did give him an increase in wages once school was completed. Also, dh paid for the schooling. He completed the schooling 5 years ago.

 

What are your thoughts on what might be ways for the employee to earn bonuses?

[Slartibartfast]

I think your dh should tell him what would be required in order to make larger bonuses and if wasn't willing to do that then there would not be further negotiation. He doesn't want to travel, work 40 hours or come in when your dh would like *and* he wants to be rewarded?

 

My husband's salary is very much based on bonuses but it is based on profits and reaching goals. It isn't based on what the employee wants, it is based on what the company wants.

[QueenCat]

Honestly, it sounds like the employee doesn't want to work for it. Dh gets bonuses based on the companies profits. All employees get a certain percent. Those that go above & beyond get more. Dh always gets more....

[cjzimmer1]

Bonuses are for work done above and beyond the normal course of duties. Since employee doesn't work above 40 hours a week, employee hasn't gone above or beyond anything (if anything I'd say he/she is a slacker for not even completing a normal workweek), however, it does sound like employee has taken on additional work/responsibilities. So while I think it reasonable for the employee to get a yearly raise, bonuses would not be handed out for someone who couldn't work even a standard work week.

[QuirkyKapers]

Honestly, it sounds like the employee doesn't want to work for it. Dh gets bonuses based on the companies profits. All employees get a certain percent. Those that go above & beyond get more. Dh always gets more....

 

 

How does that bonus everyone receives get calculated? A percentage basis and what is the percent? Everyone gets a bonus irregardless of work performance but you can earn more based on what you do?

 

Thanks!

Edited November 9, 2012 by QuirkyKapers

[Sarah CB]

Bonuses are for work done above and beyond the normal course of duties. Since employee doesn't work above 40 hours a week, employee hasn't gone above or beyond anything (if anything I'd say he/she is a slacker for not even completing a normal workweek), however, it does sound like employee has taken on additional work/responsibilities. So while I think it reasonable for the employee to get a yearly raise, bonuses would not be handed out for someone who couldn't work even a standard work week.

 

I think this sounds totally sensible. Maybe dh could let the employee know what kind of work habits (big work weeks, travel, etc.) lead to a bonus. I also agree that if the employee has taken on extra responsibility then he should get a raise in what he is paid regularly.

[QuirkyKapers]

I think your dh should tell him what would be required in order to make larger bonuses and if wasn't willing to do that then there would not be further negotiation. He doesn't want to travel, work 40 hours or come in when your dh would like *and* he wants to be rewarded?

 

**My husband has told him every year what was expected. He keeps saying maybe he would work more if he was paid more.

 

My husband's salary is very much based on bonuses but it is based on profits and reaching goals. It isn't based on what the employee wants, it is based on what the company wants.

 

:DRight now my dh's goals are for this person to show up on time, work at least 40 hours and take the initiative to see what work needs to be done and do it or ask if unsure. Dh has told person this. Person wanted to partner few years back and dh told him that wouldn't happen unless these things changed.

[Stacy in NJ]

Your dh should look for a new hire who he can train to fill in the gap some of the responsibilities Employee A is currently filling. It sounds like employee A has got your husband between a rock and a hard place because your dh needs his help to support the business. Your dh needs to diversify his work force so no one employee is irreplaceable. Having some overlap in skills and experience is absolutely necessary when running a small business. Tell your dh to hire a promising part-timer to train to potentially replace employee A.

[kitten18]

:DRight now my dh's goals are for this person to show up on time, work at least 40 hours and take the initiative to see what work needs to be done and do it or ask if unsure. Dh has told person this. Person wanted to partner few years back and dh told him that wouldn't happen unless these things changed.

:001_huh: Eeek! Thank goodness you didn't take him on as a partner.

 

This person sounds delusional.

[QuirkyKapers]

Your dh should look for a new hire who he can train to fill in the gap some of the responsibilities Employee A is currently filling. It sounds like employee A has got your husband between a rock and a hard place because your dh needs his help to support the business. Your dh needs to diversify his work force so no one employee is irreplaceable. Having some overlap in skills and experience is absolutely necessary when running a small business. Tell your dh to hire a promising part-timer to train to potentially replace employee A.

:iagree: This is spot on.

[Parrothead]

 

What are your thoughts on what might be ways for the employee to earn bonuses?

He should go to work for another company and your dh should hire someone who wants to work.

[Melinda S in TX]

Sounds like dh is putting up with a substandard employee. Is there any reason (special training, relative, ?) he has to put up with this employee? Dh gets bonuses because he works hard. He would have been shown the door long ago if he had acted like your dh's employee.

[Happy]

Your dh should look for a new hire who he can train to fill in the gap some of the responsibilities Employee A is currently filling. It sounds like employee A has got your husband between a rock and a hard place because your dh needs his help to support the business. Your dh needs to diversify his work force so no one employee is irreplaceable. Having some overlap in skills and experience is absolutely necessary when running a small business. Tell your dh to hire a promising part-timer to train to potentially replace employee A.

 

:iagree:

Also set the required standard IN WRITING. Have the employee sign and date. Keep this and any evaluations on file. Having documents in writing keeps everyone on the same page.

 

To me, it sounds like this employee is getting to be more trouble than he is worth. Perhaps your husband should let him know in no uncertain terms that some things are NOT up for discussion--your husband's bonus compared with employee's bonus is one of those things. The employee can ask how to earn a bigger bonus...and then do the work.

[Melinda S in TX]

:DRight now my dh's goals are for this person to show up on time, work at least 40 hours and take the initiative to see what work needs to be done and do it or ask if unsure. Dh has told person this. Person wanted to partner few years back and dh told him that wouldn't happen unless these things changed.

 

 

Dh shouldn't have goals for the employee. He should have expectations and it should be the employees goal to meet/exceed them.

[Mergath]

My dh works for a manufacturing company. All the employees are eligible to receive quarterly bonuses. The way it works is that the company is divided up into different divisions (fabrication, machining, etc.) and there are different productivity levels. If the minimum level is met by one division, every employee will receive a bonus check, based on how many hours they put in over the last quarter. My dh normally works around sixty hours a week and is the best saw operator they have, so his bonus checks have been fairly nice. :)

 

I can tell you right now that if the company had an employee like the one you've described, op, they would have been fired a long time ago. That's ridiculous. No boss should have to beg his employees to come to work on time. Train someone else to do his job and fire him.

[Stacy in NJ]

:iagree: This is spot on.

 

I'd do this carefully, though. I wouldn't want employee A to quit until someone new had some time and training completed. I wouldn't want employee A to feel too threatened, at least not initially. Hiring some one new may also light a fire under employee A's butt. :tongue_smilie:

 

Also, if employee A is doing payroll, your dh needs to get a outside payroll compay (or he can do it himself) to process his pay. He needs to keep his financial circumstances private. Stop giving that info to employee A.

[Hockey Mom]

I'd do this carefully, though. I wouldn't want employee A to quit until someone new had some time and training completed. I wouldn't want employee A to feel too threatened, at least not initially. Hiring some one new may also light a fire under employee A's butt. :tongue_smilie:

 

Also, if employee A is doing payroll, your dh needs to get a outside payroll compay (or he can do it himself) to process his pay. He needs to keep his financial circumstances private. Stop giving that info to employee A.

:iagree:

 

We use Quickbooks Payroll. They walk you through the setup over the phone, run a test payroll, and after that, it's just a matter of putting in the hours worked.

 

They have various levels of payroll services to meet pretty much any budget.

[Plink]

We have a system for calculating bonuses that takes into account years worked for the company, average number of hours worked per week during the period, and the position of the employee. It is fair, but not equal to all employees.

 

Honestly though, I'd start looking for another staff member. This guy is going to continue creating problems.

[StephanieZ]

We own a business, too, and I feel for you both. Employee issues are a *****.

 

Dh is the OWNER. He is SUPPOSED to make more. Way more. He takes the risks. He signs the papers. He's the one the creditors would come after and force into bankruptcy if things went south in your industry. He created the cash-cow. It's HIS. Employees are only worth the $$ they are worth in the fair-market for the services they provide on a daily/weekly/monthly basis. If you feel inclined to pay a bit of a premium to retain a long-term reliable, good employee, well, that is a fair (and often wise) business call. Even then, though, it is crazy to pay a HUGE premium for longevity. At that point, you are better off taking the risk on new staff.

 

So, what is the fair market value of this EMPLOYEE? How much would you need to pay someone to replace? How much training would you have to do with a new hire? Etc? How much could s/he get if he jumped ship to a competitor or started up his own venture?

 

That said, I think that what WE think is right or fair is meaningless. It all comes down to finding sth acceptable to the employee and dh.

 

Personally, I think the employee sounds like a loser. I'd find a replacement. If you can't/don't want to fire the employee right away, then bring in an additional employee "since Employee Whiner can't work the needed hours" and then see how it goes. With a new GOOD employee on board, it'll be obvious as to whether a) dh is super happy to be able to work fewer hours with the extra help or b) it's obviously time to fire Employee Whiner or c) Employee Whiner IS actually super awesome and produces more in his measly 35 hrs than Employee Newbie does in 50 . . .

 

So, I'd likely find a way to fire him or get him to quit. No employee is irreplaceable. (What would you do if he got in a car wreck tomorrow? Would the business tank? If not, then move forward.)

 

We have no patience for staff with attitude. We've risked everything we have for this business, and we share generously with our staff and treat them with respect, but everyone understands who is the BOSS and the OWNER . . .

[QuirkyKapers]

They write programs for their clients: accounts payable/receivables, general ledger etc. He can access the clients programs, including their payments, and so he knows when a client has paid dh's company. I had asked dh if there was a way to not have employee work on the programs for that part of the system. Offhand he couldn't think of how. When you add to or change anything in the programs, you have to make sure the changes didn't negatively affect any other part of them.

[nono]

Well, I'll take a slightly differing view...

 

Is this guy getting 40 hrs of work done in 35 hours? I can understand how in a manufacturing job, 40 hrs. = 40 hrs., but in other lines of work, that isn't so clear. My dh receives a good hourly billing rate for a poor, coastal area. However, folks have observed to me more than once, "What he fixes stays fixed. And he's quick."

 

So my advice to you and your dh is to evaluate on goals accomplished* v. timeframe. You may be focusing on timeframe (less than 40 hours), when that isn't the actual problem, but a symptom. If he's not accomplishing his goals (which should be in writing), then he needs to up the effort and/or time to reach them. Some people really can work smarter. The rest, they have to put in the hours. ;)

 

*tasks complete, whatever you use as your quantifier :)

[QuirkyKapers]

StephanieZ,

 

You are correct. We are the owners. However, for some reason, this employee feels he has been with the company long enough and has been an asset, therefore he should be compensated. He doesn't see it that way owner versus employee. I think since it is such a small company, three employees, there isn't room for advancement unless he could become partner. So, the only other way to "reward" the employee is financially. Actually, I know there are other ways. For this employee, that seems to be the only way he would be satisfied.

 

Dh is trying to get the other employee up to speed, but it is the type of job that just takes a couple years to really get a good handle on. If the employee central to the discussion would leave, it wouldn't be the worst thing, however, it would mean quite a bit more hours for dh. They also just took on another new client, so I think it would be pretty stressful for dh. However, in the end it would work out I am sure. I really think dh should do what he thinks and if the person is unhappy, so be it. He is the owner. If he is unhappy, encourage him to look elsewhere.

[QuirkyKapers]

Well, I'll take a slightly differing view...

 

Is this guy getting 40 hrs of work done in 35 hours? I can understand how in a manufacturing job, 40 hrs. = 40 hrs., but in other lines of work, that isn't so clear. My dh receives a good hourly billing rate for a poor, coastal area. However, folks have observed to me more than once, "What he fixes stays fixed. And he's quick."

 

So my advice to you and your dh is to evaluate on goals accomplished* v. timeframe. You may be focusing on timeframe (less than 40 hours), when that isn't the actual problem, but a symptom. If he's not accomplishing his goals (which should be in writing), then he needs to up the effort and/or time to reach them. Some people really can work smarter. The rest, they have to put in the hours. ;)

 

*tasks complete, whatever you use as your quantifier :)

 

That is a good thing to think about. Part of the problem is that there is a lot more work that needs to be done. This employee doesn't want to take on more hours, or work, but wants more money. So, even if he is being efficient with his time, what about the extra work that dh needs help with?

 

Just FYI, my dh has given salary raises, just not bonuses.

[Carol in Cal.]

1. DH is the owner, so he should be paid more than the Em..

2. Employee, if he is efficient to the point where he is getting 50 hours of work done in 35 hours, should be paid a higher than normal amount, IMO. (That was just an example.) Make the responsibilities suit the job. If he is working less than 40 hours but is getting all the work done, then define what additional work (rather than what additional hours) would justify a raise or a higher bonus.)

3. There is no reason for him to be doing payroll, and that is just asking for trouble. Payroll services are cheap and WEP.

4. If this is an ongoing morale problem for your DH, he really should define attitude as part of the job responsibilities. Making the boss perpetually miserable should not be rewarded with raises. Develop an actual process, and include attitude and lack of whining as part of the job--that give the employee hope, it sets expectations that are clear and reasonable, and it would ease the load on DH. Win, win, win.

[kitten18]

We own a business, too, and I feel for you both. Employee issues are a *****.

 

Dh is the OWNER. He is SUPPOSED to make more. Way more. He takes the risks. He signs the papers. He's the one the creditors would come after and force into bankruptcy if things went south in your industry. He created the cash-cow. It's HIS. Employees are only worth the $$ they are worth in the fair-market for the services they provide on a daily/weekly/monthly basis. If you feel inclined to pay a bit of a premium to retain a long-term reliable, good employee, well, that is a fair (and often wise) business call. Even then, though, it is crazy to pay a HUGE premium for longevity. At that point, you are better off taking the risk on new staff.

 

So, what is the fair market value of this EMPLOYEE? How much would you need to pay someone to replace? How much training would you have to do with a new hire? Etc? How much could s/he get if he jumped ship to a competitor or started up his own venture?

 

That said, I think that what WE think is right or fair is meaningless. It all comes down to finding sth acceptable to the employee and dh.

 

Personally, I think the employee sounds like a loser. I'd find a replacement. If you can't/don't want to fire the employee right away, then bring in an additional employee "since Employee Whiner can't work the needed hours" and then see how it goes. With a new GOOD employee on board, it'll be obvious as to whether a) dh is super happy to be able to work fewer hours with the extra help or b) it's obviously time to fire Employee Whiner or c) Employee Whiner IS actually super awesome and produces more in his measly 35 hrs than Employee Newbie does in 50 . . .

 

So, I'd likely find a way to fire him or get him to quit. No employee is irreplaceable. (What would you do if he got in a car wreck tomorrow? Would the business tank? If not, then move forward.)

 

We have no patience for staff with attitude. We've risked everything we have for this business, and we share generously with our staff and treat them with respect, but everyone understands who is the BOSS and the OWNER . . .

I agree with everything.:iagree:

 

That is a good thing to think about. Part of the problem is that there is a lot more work that needs to be done. This employee doesn't want to take on more hours, or work, but wants more money. So, even if he is being efficient with his time, what about the extra work that dh needs help with?

 

Just FYI, my dh has given salary raises, just not bonuses.

This employee is able to help your DH more, but is just not willing to? That is unacceptable, IMO. My DH would have no patience for that.

 

 

My DH has employees that are great employees, they would be lousy business owners. A couple of our employees made more than we did last year, they get compensated for the MANY hours that they work. This year, it looks like we will make more. That is one of the risks/benefits of being the owner, some years you make more, some less. *shrug*

[Annie G]

I work part time for Walmart and our quarterly bonuses are divvied up based on the average number of hours a week during the quarter. People who work more hours get more bonus. With that scenario, maybe the guy would be willing to work more hours...but it really seems like he just wants perks with no real work. I think your dh is going to have to start being more pushy with his expectations.

[nono]

That is a good thing to think about. Part of the problem is that there is a lot more work that needs to be done. This employee doesn't want to take on more hours, or work, but wants more money. So, even if he is being efficient with his time, what about the extra work that dh needs help with?

 

Just FYI, my dh has given salary raises, just not bonuses.

 

First, I never doubted you guys are good employers, 'cause the person has stayed so long. So your last line isn't necessary. :D

 

OK, so interesting piece you put out there in the first paragraph. Is there a way to tie bonuses to extra work accomplished... the old "above and beyond" idea? It may not motivate him, since he just wants more for the same work, but it will give you a framework for the next person who takes on the role. And it kills two birds with one stone...

 

Your struggles here are exactly why I'm getting well-versed in child-labor laws in NJ. I want our business to stay within our family of 4. :tongue_smilie:

 

 

:grouphug::grouphug::grouphug:

[QuirkyKapers]

 

Is there a way to tie bonuses to extra work accomplished... the old "above and beyond" idea? It may not motivate him, since he just wants more for the same work,

 

 

This is the problem, finding what would motivate him.

 

I think the thing is let's say employee does work over 40 hours, would you pay him time and a half? (Originally, like I said he was salary and was expected to do more hours but never did them). What happens than is my dh is on salary but hasn't compensated himself for the hours he worked over 40 hours. He suggested that to employee a system where whomever worked over 40 hours was also compensated accordingly. Employee didn't like that. So, it doesn't seem like that is a motivator.

 

I suggested to dh having something like when employee has accumulated so many billable hours, then there is a bonus. (Some work that is done is part of the contract, other parts aren't so the work done can be billed).

[Carrie12345]

The way it's working in dh's small(ish) business is to (hopefully, lol) earn your salary back in profits and then receive a percentage of each subsequent job's profits after that, so more commission than bonus.

 

The company does also do yearly bonuses based on overall company income/profit, but the commission set up is pretty motivating to begin with!

[QuirkyKapers]

The way it's working in dh's small(ish) business is to (hopefully, lol) earn your salary back in profits and then receive a percentage of each subsequent job's profits after that, so more commission than bonus.

 

The company does also do yearly bonuses based on overall company income/profit, but the commission set up is pretty motivating to begin with!

 

 

How much of percentage of the other jobs profits do the employees receive, if you don't mind answering? Otherwise just tell me its confidential!

[gardenmom5]

you have an employee who wants the goodies with none of the work. and complains about it to his boss? I'd start looking for a replacement employee who actually wants the job and is willing to work.

 

eta: i think that is the problem with this employee. He doesn't see himself as an *EMPLOYEE* - but as a psuedo-partner. he isn't.

Edited November 10, 2012 by gardenmom5

[Carrie12345]

How much of percentage of the other jobs profits do the employees receive, if you don't mind answering? Otherwise just tell me its confidential!

 

I'll PM you. ;)