determining employee value

[Grumbling Mike]

Share your thoughts on paying employees based on the value they provide the company, 1-2-3-4-5-6 frames per hour for framers X fitting charge?
% of sales for sellers
what works for you?

[JRB]

Generally, I think you have to get about a seven time return in produced or sold products to make having an employee a worth wile investment.

HOWEVER, there are other factors to consider, like how much is a day off worth to you? How do you like working alone? How do you like cleaning the bathroom, emptying the trash, doing window displays, dealing with solicitors, etc.

If you are a small operation, having an employee is like having a partner, you have someone there with you if you need them. Placing a value on that is hard to do.

If you are a large operation, then all that changes. You have to work out profitable formulas for justifying and evaluating your parole. Those formulas are usually going to depend on production and sales. The other factors still have to be taken into account, such as how do they represent your company's image, how do they get along in the company structure and with other employees?

Your question is a tough one and there are way to many variables to be answered in a simplistic manner, such as a six or seven time return on your dollar.

John

[tnframer408]

John: lemme see if I undestand this: My labor costs I figure at $60 perhour--just 'cause it's easier to figure per minute or per second costs of labor--$1 per minute, $.01 per second. But I pay my employee $10 per hour.

According to you, does this mean I should really be charging $70 per hour labor? No biggie, and can easily change labor figs; just want to know if this is what you mean by a 7X labor charge??? :rolleyes:

[JRB]

Michael, that is what I meant. This is not an iron clad rule, it's just a figure I like to work with. Much like your frame mark up, some shops go X times, others go Y times.

Labor charges are going to vary from region to region. Your charges are going to be dependent on your market area. If you are getting along fine on $60.00 and your customers feel that is fair, then why change it?

However if your $60.00 has been that way for some years, you may want to see what other shops in your area charge, an adjustment is probably in order. It all is really based on your needs, are your bills getting paid on time? Are you saving anything?

John

[katman]

I'm down to one employee now. Couldn't convince the other one that getting married to a sailor and moving to Hawaii was a bad lifestyle change.

I pay the remaining employee $14.50/hr and I provide health insurance. He's generally a pretty happy trooper. About every six or eight weeks I do have to give him a "motivational" talk. He's 25 and wants to be a professional photographer so he periodically starts dwelling on why he hasn't been discovered. His productivity drops way down, and the quality of his work suffers, during these periods of contemplation. These downturns always coincide with periods when business is slow. A kick in the butt and reminder of work to do during slow retail periods get him right back on track.

After reading here what others pay employees I've wondered whether I should look for cheaper help when I replace my departed employee. And,I've encouraged my remaining employee to complete his college education. He's put in the application so if he goes back to school I'll need to find a replacement.

I've used the productivity approach in developing my pay rates (value=widgets produced per hour). But you can't forget the intangibles: is the employee reliable, interested in producing a quality product and interested in the line of work, and does he/she get along well with customers. These are just a few measures.

Doesn't help much if the employee can't make it to work, chases customers away, and produces a lot of product that has to be redone.