Is Anyone Using Flat Rate For Any Of Their Employees?

Mike Finley · 11-06-2009, 09:51 AM

Quote:

Originally Posted by XanadooLTD

Im not saying to do anything but use those guys as subs and give them piece work. There is nothing wrong with that at all. They are then sub contractors and responsible for their own taxes, etc.

Are you going to treat them like subs or play the sh*t head game of treating them like employees on the job but subs in the pay check?

So you're going to let them set thier own hours of starting and finishing each day, not tell them how to do the work, they will be free to work for others, you will be collecting copies of their workman's comp certificates and their general liability certificates... etc.. etc.. ?

just checking.

Tiger · 11-06-2009, 09:59 AM

Quote:

Originally Posted by XanadooLTD

Im not saying to do anything but use those guys as subs and give them piece work. There is nothing wrong with that at all. They are then sub contractors and responsible for their own taxes, etc.

Businesses using subs might be the IRSs new favorite target. There are many items required to qualify. My understanding is that if you contract with a sub who has their own insurance, hand them a print and point them to the work, you're probably OK. If they don't have insurance and you direct they way they perform their work, you're probably not OK.

If a sub is found to be an employee you will probably owe penalties, workman's comp, etc. It's usually a very large bill, although an easy payment plan over the rest of your career can probably be negotiated.

I believe the IRS has a questionnaire online to help define if your sub is really an employee.

ARI001 · 11-06-2009, 10:18 AM

IRS 20 Factors and 3 Categories of Control

Revenue Ruling 87-41: The Twenty Factors

To help determine whether a worker is an employee under the common law rules, the IRS identified 20 factors that may indicate whether the employer can exercise enough control to establish an employer-employee relationship. These factors, set forth in Revenue Ruling 87-41, were based on the circumstances that the courts identified and relied upon to decide whether an employment relationship existed. Not all the factors must be present to find an employee/employment relationship, but the factors are guides to use to assess the likelihood as to whether an individual is an employee or an independent contractor.

(1) Instructions. An employee must comply with instructions about when, where and how to work. The control factor is present if the employer has the right to require compliance with the instructions.

(2) Training. An employee receives on-going training from, or at the direction of, the employer.
Independent contractors use their own methods and receive no training from the purchasers of their services.

(3) Integration. An employee’s services are integrated into the business operations because the services are important to the business. This shows that the worker is subject to direction and control of the employer.

(4) Services rendered personally. If the services must be rendered personally, presumably the employer is interested in the methods used to accomplish the work as well as the end results. An employee often does not have the ability to assign their work to other employees, an independent contractor may assign the work to others.

(5) Hiring, supervising and paying assistants. If an employer hires, supervises and pays assistants, the worker is generally categorized as an employee. An independent contractor hires, supervises and pays assistants under a contract that requires him or her to provide materials and labor and to be responsible only for the result.

(6) Continuing relationship. A continuing relationship between the worker and the employer indicates that an employer-employee relationship exists. The IRS has found that a continuing relationship may exist where work is performed at frequently recurring intervals, even if the intervals are irregular.

(7) Set hours of work. A worker who has set hours of work established by an employer is generally an employee. An independent contractor sets his/her own schedule.

(8) Full time required. An employee normally works full time for an employer. An independent contractor is free to work when and for whom he or she chooses.

(9) Work done on premises. Work performed on the premises of the employer for whom the services are performed suggests employer control, and therefore, the worker may be an employee. Independent Contractor may perform the work wherever they desire as long as the contract requirements are performed.

(10) Order or sequence set. A worker who must perform services in the order or sequence set by an employer is generally an employee. Independent Contractor performs the work in whatever order or sequence they may desire.

(11) Oral or written reports. A requirement that the worker submit regular or written reports to the employer indicates a degree of control by the employer.

(12) Payments by hour, week or month. Payments by the hour, week or month generally point to an employer-employee relationship.

(13) Payment of expenses. If the employer ordinarily pays the worker’s business and/or travel expenses, the worker is ordinarily an employee.

(14) Furnishing of tools and materials. If the employer furnishes significant tools, materials and other equipment by an employer, the worker is generally an employee.

(15) Significant investment. If a worker has a significant investment in the facilities where the worker performs services, the worker may be an independent contractor.

(16) Profit or loss. If the worker can make a profit or suffer a loss, the worker may be an independent contractor. Employees are typically paid for their time and labor and have no liability for business expenses.

(17) Working for more than one firm at a time.If a worker performs services for a multiple of unrelated firms at the same time, the worker may be an independent contractor.

(18) Making services available to the general public. If a worker makes his or her services available to the general public on a regular and consistent basis, the worker may be an independent contractor.

(19) Right to discharge. The employer’s right to discharge a worker is a factor indicating that the worker is an employee.

(20) Right to terminate. If the worker can quit work at any time without incurring liability, the worker is generally an employee.

Three Categories of Control Factors

Over the years, the Internal Revenue Service recognized changes in business practices and therefore created three categories of factors to assess the degree of control and independence. These factors are to be used in conjunction with the 20 Factors.

(1) Behavioral Control - Includes the type of instructions the business gives to the worker, such as when and where to do the work, and the training the business provides to the worker. The key consideration is whether the business has retained the right to control the details of the worker’s performance or has relinquished that right

(2) Financial Control - Address the business’s right to control the business aspects of the worker’s job.

(3) Relationship Of Parties - The nature of the relationship may be evidenced by:
_ a written contract;
_ the benefits the business provides to an employee, such as paid vacation and health coverage;
_ the permanency of the position; and
_ the extent to which the services performed are a key aspect of the regular business of the company.

More information and the questioneer is available at the IRS website.

BamBamm5144 · 11-06-2009, 10:52 AM

KGMZ - If that is the exact wording then what we are doing is perfectly legal. There is a pretty good sized roofing company around here that has all their "employees" registered as sub-contractors. I didn't know that was illegal until about a minute ago.

KennMacMoragh · 11-06-2009, 02:09 PM

I've worked for a couple of companies that would pay a piece price only to their lead carpenters. It's legal but I hate it, there's too many things that can go wrong. True it gives your employees an incentive to work harder, and probably on most jobs they will make more money. But if something goes wrong, they will get screwed, I also didn't like how my companies would only give their leads a piece price, why not give it to everybody?

My own personal opinion, the best method for an incentive pay is to give your employees either profit sharing or bonuses. It's not as direct as a piece price so they won't be as likely to skimp on quality, and they won't get screwed over if you mess up on a bid or if something goes wrong beyond their control. Yet it still gives them some motivation to try hard.

Zinsco · 11-06-2009, 02:46 PM

Wow, this subject never fails to confuse people. I have been paying piecework for decades, been audited by workers comp and IRS and always passed with flying colors.

First off, if the employee is being paid by the piece and performs a poor installation, he must fix it on his own time. His task is not complete until it is done right and he knows this. When I pay by the piece, I get better quality work.

Secondly, piecework is not wages, so discussions about minimum wage and over time are not applicable. And yes, of course you pay comp and withhold taxes, it's not that complicated, people!

The only time I pay piecework is on new houses. Piecework only works on tasks that are more or less repetitious, although most electrical service technicians using flat rate books are paid by the piece.

You must be fair in determining the piece rates, don't exploit your people by making them run like dogs to average $15 an hour. A guy who works briskly and efficiently should make good money, and the slow pokes and slackers will quit.

As a contractor, by using a piecework business model, I know before I start a job how much money I'm gonna make, whether it takes 4 days or 5 days. I have almost eliminated the risks associated with production from my business.

Trades that are prime candidates for piecework are painting, drywall, framing, etc. Trades where there are few unknown "externalities" that can impact production.

Piecework is good for all parties, it's fair and democratic when done properly.

.

Zinsco · 11-06-2009, 02:59 PM

Quote:

Originally Posted by ARI001

IRS 20 Factors and 3 Categories of Control

Revenue Ruling 87-41: The Twenty Factors

To help determine whether a worker is an employee under the common law rules, the IRS identified 20 factors that may indicate whether the employer can exercise enough control to establish an employer-employee relationship. These factors, set forth in Revenue Ruling 87-41, were based on the circumstances that the courts identified and relied upon to decide whether an employment relationship existed. Not all the factors must be present to find an employee/employment relationship, but the factors are guides to use to assess the likelihood as to whether an individual is an employee or an independent contractor.

(1) Instructions. An employee must comply with instructions about when, where and how to work. The control factor is present if the employer has the right to require compliance with the instructions.

(2) Training. An employee receives on-going training from, or at the direction of, the employer.
Independent contractors use their own methods and receive no training from the purchasers of their services.

(3) Integration. An employee’s services are integrated into the business operations because the services are important to the business. This shows that the worker is subject to direction and control of the employer.

(4) Services rendered personally. If the services must be rendered personally, presumably the employer is interested in the methods used to accomplish the work as well as the end results. An employee often does not have the ability to assign their work to other employees, an independent contractor may assign the work to others.

(5) Hiring, supervising and paying assistants. If an employer hires, supervises and pays assistants, the worker is generally categorized as an employee. An independent contractor hires, supervises and pays assistants under a contract that requires him or her to provide materials and labor and to be responsible only for the result.

(6) Continuing relationship. A continuing relationship between the worker and the employer indicates that an employer-employee relationship exists. The IRS has found that a continuing relationship may exist where work is performed at frequently recurring intervals, even if the intervals are irregular.

(7) Set hours of work. A worker who has set hours of work established by an employer is generally an employee. An independent contractor sets his/her own schedule.

(8) Full time required. An employee normally works full time for an employer. An independent contractor is free to work when and for whom he or she chooses.

(9) Work done on premises. Work performed on the premises of the employer for whom the services are performed suggests employer control, and therefore, the worker may be an employee. Independent Contractor may perform the work wherever they desire as long as the contract requirements are performed.

(10) Order or sequence set. A worker who must perform services in the order or sequence set by an employer is generally an employee. Independent Contractor performs the work in whatever order or sequence they may desire.

(11) Oral or written reports. A requirement that the worker submit regular or written reports to the employer indicates a degree of control by the employer.

(12) Payments by hour, week or month. Payments by the hour, week or month generally point to an employer-employee relationship.

(13) Payment of expenses. If the employer ordinarily pays the worker’s business and/or travel expenses, the worker is ordinarily an employee.

(14) Furnishing of tools and materials. If the employer furnishes significant tools, materials and other equipment by an employer, the worker is generally an employee.

(15) Significant investment. If a worker has a significant investment in the facilities where the worker performs services, the worker may be an independent contractor.

(16) Profit or loss. If the worker can make a profit or suffer a loss, the worker may be an independent contractor. Employees are typically paid for their time and labor and have no liability for business expenses.

(17) Working for more than one firm at a time.If a worker performs services for a multiple of unrelated firms at the same time, the worker may be an independent contractor.

(18) Making services available to the general public. If a worker makes his or her services available to the general public on a regular and consistent basis, the worker may be an independent contractor.

(19) Right to discharge. The employer’s right to discharge a worker is a factor indicating that the worker is an employee.

(20) Right to terminate. If the worker can quit work at any time without incurring liability, the worker is generally an employee.

Three Categories of Control Factors

Over the years, the Internal Revenue Service recognized changes in business practices and therefore created three categories of factors to assess the degree of control and independence. These factors are to be used in conjunction with the 20 Factors.

(1) Behavioral Control - Includes the type of instructions the business gives to the worker, such as when and where to do the work, and the training the business provides to the worker. The key consideration is whether the business has retained the right to control the details of the worker’s performance or has relinquished that right

(2) Financial Control - Address the business’s right to control the business aspects of the worker’s job.

(3) Relationship Of Parties - The nature of the relationship may be evidenced by:
_ a written contract;
_ the benefits the business provides to an employee, such as paid vacation and health coverage;
_ the permanency of the position; and
_ the extent to which the services performed are a key aspect of the regular business of the company.

More information and the questioneer is available at the IRS website.

Thank you for posting this ARI001, these are the criteria used to establish who is actually a sub contractor, and in most cases, when this test is applied to "independent contractors" the result is they are reclassified as employees.

I just had cable tv put in my house. I was talking to the technician and learned that he is paid by the piece and is treated as an independent contractor. I quizzed him lightly and was surprised that he did indeed meet the requirements! Additionally, since these jobs are less than $500, here in California he did not require a contractors license.

Piece work and subcontracting are 2 different subjects, in the case of my cable TV technician, they converged, but that is not always the case.

Great post, ARI001
.
.

KennMacMoragh · 11-07-2009, 02:01 PM

Quote:

Originally Posted by Zinsco

.Trades that are prime candidates for piecework are painting, drywall, framing, etc. Trades where there are few unknown "externalities" that can impact production.

Piecework is good for all parties, it's fair and democratic when done properly.

.

For an electrician doing new houses, I can see how it would work out. As long as you are experienced doing electrical estimates, there's probably not too many variables that can screw up your bid. Drywall I can see working, the bid is pretty straight forward on new construction.

In framing though, sometimes people do it, but it screws everything up. There is a lot of variables in framing that can screw up a bid, if you make a mistake, then the employee eats it up. Another problem with it is, what do you do when you have a crew of four people? Do you just pay the lead guy a piece work price? Then every one else gets an hourly wage? One thing I've seen happen multiple times is for example; a company will hire a guy Jim, they need a lead man, they make Jim the lead. Later they hire another guy for a helper, Tim. Jim has been framing for three years, Tim has been framing for 12 years. But then only Jim gets the piece price? If the job works out well then why would Jim make three times the money as Tim? When he only has a fraction of the experience and technical skills. Then there's jealousy and people quit, and then don't care about their jobs. I've seen several different things that just piss everyone off on piece work jobs. Whenever I see the bonus or profit sharing approach, it always seems to work out fine

Framer53 · 11-07-2009, 02:13 PM

First off, if the employee is being paid by the piece and performs a poor installation, he must fix it on his own time>>>>>>>>>>>>>>>>>>

Dead wrong. They must be paid minimun wage. Look it up.
Go to your state dept of labor, if you require an employee to fix anything on "there" time, that means you aren't paying them. That means you are stealing the only thing an emplyee has to sell, his time. A company has to pay for an employee's tme, whether piece rate or what.
The way you say they are doing this and no one complains, is because you are paying them more than minimun wage would be.

For examole, if you are paying an employee piece rate that say is averages 400/week, that means the employee is fixing in your terms his own time. The fact is, that is correct, because you are paying more than the minimum wage set by the federal or state government. The fact is, it is not their time, it is time you have or are paying for.

Framer53 · 11-07-2009, 02:21 PM

Secondly, piecework is not wages, so discussions about minimum wage and over time are not applicable. And yes, of course you pay comp and withhold taxes, it's not that complicated, people>>>>>>>>>>>>>>>>>>>

Actually how would you classify it? Salery?

It is a wage, one which you have set up to pay your men.
This means, you have to be aware of the minimum wage law, which is set up to make sure you are paying people a minimun that has been set by the government.

Bless you if it works for you. Most trades it does not work well in, because the tasks change on a daily basis.
For example:

I was a framing carpenter. Some of what I do are repetitive, example building walls, etc..
If you wanted to be paid on a square foot price, fine. As a carpenter, there are just too many variables for a square foot price to be accurate.
I guarentee that framing contractors would like to pay, "piece rate", by definition square foot price, but that is not fair, because some houses are harder to build than others.
The burden of risk would be shifting from the contractor, to the employee. That means the people that are making the least are shouldering the risk. Trust me, any carpenter would tell you to pound salt.

delavan · 12-10-2009, 09:01 PM

Quote:

Originally Posted by CookeCarpentry

What if they rush to get everything done as quickly as possible to make the most money? (thereby sacrificing quality).

This is always a problem. Sometimes you must inform that it can take 10 hours but also 25 hours ahe he must be prepared.

NormW · 12-10-2009, 09:23 PM

K, maybe Im naivle... but..

Why couldn't you pay "piece work'. We are contractors. If you can spell it out in writing, I think we can arrange whatever floats our boats. The biggest rule being, is it "fair", If its not it won't hold up in court.

Im sure a lawyer could help you work out the language, if you feel its more complicated then what can be spelled out in plain English. Try writing it that way, then have a lawyer look it over.

Over here, we cover the subs workers comp insurance, if they don't have a certificate. Im suprised that other states don't do this. Subs seem to be the rule over here. Occasionally I get a guy who at the end of the year acts "suprised" when I mention 1099s.

For you guys who carry employees, I salute you. I wonder what advantages there is to this. Both for the Contractor, and the employee... Benefits? Here subs, get paid better than employees, and IMO I would much rather work as a sub. Yes, Occasionally I get a Contractor who treats me as an employee. One way to answer this is by positioning my truck in front of the local watering hole during "regular" work hours. This quickly leads to a discussion on the difference between a sub and a employee for those who should know better .

OGStilts · 12-10-2009, 09:23 PM

delavan,

you do realize you are going around and answering a bunch of posts that are over a month old...and to be honest you are answering them badly.

HomerJ · 01-07-2011, 03:10 PM

Quote:

Originally Posted by Zinsco

Wow, this subject never fails to confuse people. I have been paying piecework for decades, been audited by workers comp and IRS and always passed with flying colors.

First off, if the employee is being paid by the piece and performs a poor installation, he must fix it on his own time. His task is not complete until it is done right and he knows this. When I pay by the piece, I get better quality work.

Secondly, piecework is not wages, so discussions about minimum wage and over time are not applicable. And yes, of course you pay comp and withhold taxes, it's not that complicated, people!

The only time I pay piecework is on new houses. Piecework only works on tasks that are more or less repetitious, although most electrical service technicians using flat rate books are paid by the piece.

You must be fair in determining the piece rates, don't exploit your people by making them run like dogs to average $15 an hour. A guy who works briskly and efficiently should make good money, and the slow pokes and slackers will quit.

As a contractor, by using a piecework business model, I know before I start a job how much money I'm gonna make, whether it takes 4 days or 5 days. I have almost eliminated the risks associated with production from my business.

Trades that are prime candidates for piecework are painting, drywall, framing, etc. Trades where there are few unknown "externalities" that can impact production.

Piecework is good for all parties, it's fair and democratic when done properly.

.

I'm in the process of hiring a plumber, and am intrigued by this method of pay.

He'll be installing a lot of water heaters as well as taking care of the plumbing work for our kitchen and bath remodels.

Anyone have direct experience with this?

CO762 · 01-08-2011, 09:51 PM

Quote:

Originally Posted by Tiger

Businesses using subs might be the IRSs new favorite target.

I hope so....but I hope not.

The IRS is a bureau of the Department of the Treasury.
The Department of the Treasury?
The head of that dept well, from their website, "The Secretary of the Treasury is the principal economic advisor to the President and plays a critical role in policy-making by bringing an economic and government financial policy perspective to issues facing the government."

Oh well.

Tech Dawg · 01-08-2011, 10:07 PM

I've kinda skimmed through this thread but what I do know is that from state to state paying employees piece-rate is becoming more illegal due to insurance issues. If there is a vehicle accident or on the job injury the ins.co wants to see that the employee was "on the clock"
My former employer paid this way for years but then changed to a comission based pay with an hourly/overtime calculation based on volume of install $...the end result way basically the same pay but restructured it to bypass ins. Bs
This is pretty much the same way a comcast or direct tv installer would get paid.

woodchuck2 · 01-09-2011, 11:33 AM

IMO after working in the automotive field it would be very hard to do a flat rate system in any of our fields. Reason being every job in every home is different. With an automobile what the manufacturer does is the take 3 vehicle's and three highly trained techs and they dismantle the car's keeping track of how much time it takes to remove each part off each car. They take the times of each part and each tech and average them out and that becomes the flat rate warranty time. Figuring out the standard flat rate time is a similar method and there are some unknown problem compensation time figured in too. Warranty time was usually 1/3 the time that it normally takes to do the job where standard flat time is fairly accurate.

Offering some kind of weekly incentive would more than likely be the best answer for more production. Offer the guys free lunch on Fridays and an extra $25-$50 cash to reach a certain goal by the end of the week. It may not seem like much money but for a lot of guys this may be his beer allowance or his smokes for the week, maybe his chance to take the wife to dinner or if he is a saver then it may be part of a truck payment or new golf clubs or new rifle for hunting season.

skipdow · 01-10-2011, 12:21 AM

My business is run as piece work being paid by the UI(united inch) for windows and x dollars per single door etc. I am self employed subbing for the window supplier. I do however pay MY employees hourly etc.
If someone is working piecework in my opinion they are subs not employees and that causes all kinds of problems about workers comp, insurance, taxes etc.

11-06-2009, 10:18 AM	#43
ARI001 View Profile ARI001 Pro Send Message Follow Blogs (0) Threads (318) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: General Contractor Join Date: Jun 2009 Location: Stafford, VA Posts: 318	Re: Is Anyone Using Flat Rate For Any Of Their Employees? IRS 20 Factors and 3 Categories of Control Revenue Ruling 87-41: The Twenty Factors To help determine whether a worker is an employee under the common law rules, the IRS identified 20 factors that may indicate whether the employer can exercise enough control to establish an employer-employee relationship. These factors, set forth in Revenue Ruling 87-41, were based on the circumstances that the courts identified and relied upon to decide whether an employment relationship existed. Not all the factors must be present to find an employee/employment relationship, but the factors are guides to use to assess the likelihood as to whether an individual is an employee or an independent contractor. (1) *Instructions. An employee must comply with instructions about when, where and how to work. The control factor is present if the employer has the right to require compliance with the instructions. (2) Training. An employee receives on-going training from, or at the direction of, the employer. Independent contractors use their own methods and receive no training from the purchasers of their services. (3) Integration. An employee’s services are integrated into the business operations because the services are important to the business. This shows that the worker is subject to direction and control of the employer. (4) Services rendered personally. If the services must be rendered personally, presumably the employer is interested in the methods used to accomplish the work as well as the end results. An employee often does not have the ability to assign their work to other employees, an independent contractor may assign the work to others. (5) Hiring, supervising and paying assistants. If an employer hires, supervises and pays assistants, the worker is generally categorized as an employee. An independent contractor hires, supervises and pays assistants under a contract that requires him or her to provide materials and labor and to be responsible only for the result. (6) Continuing relationship. A continuing relationship between the worker and the employer indicates that an employer-employee relationship exists. The IRS has found that a continuing relationship may exist where work is performed at frequently recurring intervals, even if the intervals are irregular. (7) Set hours of work. A worker who has set hours of work established by an employer is generally an employee. An independent contractor sets his/her own schedule. (8) Full time required. An employee normally works full time for an employer. An independent contractor is free to work when and for whom he or she chooses. (9) Work done on premises. Work performed on the premises of the employer for whom the services are performed suggests employer control, and therefore, the worker may be an employee. Independent Contractor may perform the work wherever they desire as long as the contract requirements are performed. (10) Order or sequence set. A worker who must perform services in the order or sequence set by an employer is generally an employee. Independent Contractor performs the work in whatever order or sequence they may desire. (11) Oral or written reports. A requirement that the worker submit regular or written reports to the employer indicates a degree of control by the employer. (12) Payments by hour, week or month. Payments by the hour, week or month generally point to an employer-employee relationship. (13) Payment of expenses. If the employer ordinarily pays the worker’s business and/or travel expenses, the worker is ordinarily an employee. (14) Furnishing of tools and materials. If the employer furnishes significant tools, materials and other equipment by an employer, the worker is generally an employee. (15) Significant investment. If a worker has a significant investment in the facilities where the worker performs services, the worker may be an independent contractor. (16) Profit or loss. If the worker can make a profit or suffer a loss, the worker may be an independent contractor. Employees are typically paid for their time and labor and have no liability for business expenses. (17) Working for more than one firm at a time.If a worker performs services for a multiple of unrelated firms at the same time, the worker may be an independent contractor. (18) Making services available to the general public. If a worker makes his or her services available to the general public on a regular and consistent basis, the worker may be an independent contractor. (19) Right to discharge. The employer’s right to discharge a worker is a factor indicating that the worker is an employee. (20) Right to terminate. If the worker can quit work at any time without incurring liability, the worker is generally an employee. Three Categories of Control Factors* Over the years, the Internal Revenue Service recognized changes in business practices and therefore created three categories of factors to assess the degree of control and independence. These factors are to be used in conjunction with the 20 Factors. (1) *Behavioral Control* - Includes the type of instructions the business gives to the worker, such as when and where to do the work, and the training the business provides to the worker. The key consideration is whether the business has retained the right to control the details of the worker’s performance or has relinquished that right *(2) Financial Control -* Address the business’s right to control the business aspects of the worker’s job. (3) Relationship Of Parties** - The nature of the relationship may be evidenced by: _ a written contract; _ the benefits the business provides to an employee, such as paid vacation and health coverage; _ the permanency of the position; and _ the extent to which the services performed are a key aspect of the regular business of the company. More information and the questioneer is available at the IRS website.

11-06-2009, 10:52 AM	#44
BamBamm5144 View Profile BamBamm5144 Pro Send Message Follow Blogs (0) Threads (2,728) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: Exterior Remodeling. Join Date: Jul 2008 Location: Wisconsin Posts: 2,728	Re: Is Anyone Using Flat Rate For Any Of Their Employees? KGMZ - If that is the exact wording then what we are doing is perfectly legal. There is a pretty good sized roofing company around here that has all their "employees" registered as sub-contractors. I didn't know that was illegal until about a minute ago.

11-06-2009, 02:09 PM	#45
KennMacMoragh View Profile KennMacMoragh Pro Send Message Follow Blogs (0) Threads (2,245) Photos (116) Reviews (1) Projects (0) Toolbox (1) View All Activity Pro Trade: Repair/Remodel Join Date: Sep 2008 Location: Seattle, WA Posts: 2,245	Re: Is Anyone Using Flat Rate For Any Of Their Employees? I've worked for a couple of companies that would pay a piece price only to their lead carpenters. It's legal but I hate it, there's too many things that can go wrong. True it gives your employees an incentive to work harder, and probably on most jobs they will make more money. But if something goes wrong, they will get screwed, I also didn't like how my companies would only give their leads a piece price, why not give it to everybody? My own personal opinion, the best method for an incentive pay is to give your employees either profit sharing or bonuses. It's not as direct as a piece price so they won't be as likely to skimp on quality, and they won't get screwed over if you mess up on a bid or if something goes wrong beyond their control. Yet it still gives them some motivation to try hard.

11-06-2009, 02:46 PM	#46
Zinsco View Profile Zinsco Electrosexual Send Message Follow Blogs (0) Threads (254) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Electrosexual Trade: Electrical Contractor Join Date: Oct 2009 Location: L O S A N G E L E S Posts: 254	Re: Is Anyone Using Flat Rate For Any Of Their Employees? Wow, this subject never fails to confuse people. I have been paying piecework for decades, been audited by workers comp and IRS and always passed with flying colors. First off, if the employee is being paid by the piece and performs a poor installation, he must fix it on his own time. His task is not complete until it is done right and he knows this. When I pay by the piece, I get better quality work. Secondly, piecework is not wages, so discussions about minimum wage and over time are not applicable. And yes, of course you pay comp and withhold taxes, it's not that complicated, people! The only time I pay piecework is on new houses. Piecework only works on tasks that are more or less repetitious, although most electrical service technicians using flat rate books are paid by the piece. You must be fair in determining the piece rates, don't exploit your people by making them run like dogs to average $15 an hour. A guy who works briskly and efficiently should make good money, and the slow pokes and slackers will quit. As a contractor, by using a piecework business model, I know before I start a job how much money I'm gonna make, whether it takes 4 days or 5 days. I have almost eliminated the risks associated with production from my business. Trades that are prime candidates for piecework are painting, drywall, framing, etc. Trades where there are few unknown "externalities" that can impact production. Piecework is good for all parties, it's fair and democratic when done properly. .

11-07-2009, 02:13 PM	#49
Framer53 View Profile Framer53 Pro Send Message Follow Blogs (0) Threads (2,067) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: Framing Join Date: Jan 2009 Location: Utica,NY Posts: 2,067	Re: Is Anyone Using Flat Rate For Any Of Their Employees? First off, if the employee is being paid by the piece and performs a poor installation, he must fix it on his own time>>>>>>>>>>>>>>>>>> Dead wrong. They must be paid minimun wage. Look it up. Go to your state dept of labor, if you require an employee to fix anything on "there" time, that means you aren't paying them. That means you are stealing the only thing an emplyee has to sell, his time. A company has to pay for an employee's tme, whether piece rate or what. The way you say they are doing this and no one complains, is because you are paying them more than minimun wage would be. For examole, if you are paying an employee piece rate that say is averages 400/week, that means the employee is fixing in your terms his own time. The fact is, that is correct, because you are paying more than the minimum wage set by the federal or state government. The fact is, it is not their time, it is time you have or are paying for.

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Is Anyone Using Flat Rate For Any Of Their Employees?

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11-07-2009, 02:21 PM	#50
Framer53 View Profile Framer53 Pro Send Message Follow Blogs (0) Threads (2,067) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: Framing Join Date: Jan 2009 Location: Utica,NY Posts: 2,067	Re: Is Anyone Using Flat Rate For Any Of Their Employees? Secondly, piecework is not wages, so discussions about minimum wage and over time are not applicable. And yes, of course you pay comp and withhold taxes, it's not that complicated, people>>>>>>>>>>>>>>>>>>> Actually how would you classify it? Salery? It is a wage, one which you have set up to pay your men. This means, you have to be aware of the minimum wage law, which is set up to make sure you are paying people a minimun that has been set by the government. Bless you if it works for you. Most trades it does not work well in, because the tasks change on a daily basis. For example: I was a framing carpenter. Some of what I do are repetitive, example building walls, etc.. If you wanted to be paid on a square foot price, fine. As a carpenter, there are just too many variables for a square foot price to be accurate. I guarentee that framing contractors would like to pay, "piece rate", by definition square foot price, but that is not fair, because some houses are harder to build than others. The burden of risk would be shifting from the contractor, to the employee. That means the people that are making the least are shouldering the risk. Trust me, any carpenter would tell you to pound salt.

12-10-2009, 09:23 PM	#52
NormW View Profile NormW Pro Send Message Follow Blogs (0) Threads (306) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: Builder Join Date: Jun 2009 Location: Berkshire County Posts: 306	Re: Is Anyone Using Flat Rate For Any Of Their Employees? K, maybe Im naivle... but.. Why couldn't you pay "piece work'. We are contractors. If you can spell it out in writing, I think we can arrange whatever floats our boats. The biggest rule being, is it "fair", If its not it won't hold up in court. Im sure a lawyer could help you work out the language, if you feel its more complicated then what can be spelled out in plain English. Try writing it that way, then have a lawyer look it over. Over here, we cover the subs workers comp insurance, if they don't have a certificate. Im suprised that other states don't do this. Subs seem to be the rule over here. Occasionally I get a guy who at the end of the year acts "suprised" when I mention 1099s. For you guys who carry employees, I salute you. I wonder what advantages there is to this. Both for the Contractor, and the employee... Benefits? Here subs, get paid better than employees, and IMO I would much rather work as a sub. Yes, Occasionally I get a Contractor who treats me as an employee. One way to answer this is by positioning my truck in front of the local watering hole during "regular" work hours. This quickly leads to a discussion on the difference between a sub and a employee for those who should know better .

12-10-2009, 09:23 PM	#53
OGStilts View Profile OGStilts Pro Send Message Follow Blogs (0) Threads (508) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: General Contractor Join Date: Aug 2007 Location: Chicago's North Shore Posts: 508	Re: Is Anyone Using Flat Rate For Any Of Their Employees? delavan, you do realize you are going around and answering a bunch of posts that are over a month old...and to be honest you are answering them badly. __________________ Chicago Home Remodeling- Chicago Luxury Builder- Basement Remodeling- Kitchen Remodeling-Chicago Bath Remodeling

01-08-2011, 10:07 PM	#56
Tech Dawg View Profile Tech Dawg Alone Eagle Remodeling Send Message Follow Blogs (0) Threads (4,080) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Alone Eagle Remodeling Trade: Tile and Stone Showers & Floors Join Date: Dec 2010 Location: Harrisburg, Pennsylvania Posts: 4,080	Re: Is Anyone Using Flat Rate For Any Of Their Employees? I've kinda skimmed through this thread but what I do know is that from state to state paying employees piece-rate is becoming more illegal due to insurance issues. If there is a vehicle accident or on the job injury the ins.co wants to see that the employee was "on the clock" My former employer paid this way for years but then changed to a comission based pay with an hourly/overtime calculation based on volume of install $...the end result way basically the same pay but restructured it to bypass ins. Bs This is pretty much the same way a comcast or direct tv installer would get paid. __________________ Todd Perfect work just isn't free www.aloneeagle.com

01-09-2011, 11:33 AM	#57
woodchuck2 View Profile woodchuck2 woodchuck2 Send Message Follow Blogs (0) Threads (2,319) Photos (45) Reviews (0) Projects (0) Toolbox (0) View All Activity woodchuck2 Trade: Electrical Contractor&Home Maintenance Join Date: Feb 2008 Location: North Creek, NY/Lower Adirondacks Posts: 2,319	Re: Is Anyone Using Flat Rate For Any Of Their Employees? IMO after working in the automotive field it would be very hard to do a flat rate system in any of our fields. Reason being every job in every home is different. With an automobile what the manufacturer does is the take 3 vehicle's and three highly trained techs and they dismantle the car's keeping track of how much time it takes to remove each part off each car. They take the times of each part and each tech and average them out and that becomes the flat rate warranty time. Figuring out the standard flat rate time is a similar method and there are some unknown problem compensation time figured in too. Warranty time was usually 1/3 the time that it normally takes to do the job where standard flat time is fairly accurate. Offering some kind of weekly incentive would more than likely be the best answer for more production. Offer the guys free lunch on Fridays and an extra $25-$50 cash to reach a certain goal by the end of the week. It may not seem like much money but for a lot of guys this may be his beer allowance or his smokes for the week, maybe his chance to take the wife to dinner or if he is a saver then it may be part of a truck payment or new golf clubs or new rifle for hunting season. Last edited by woodchuck2; 01-09-2011 at 11:40 AM.

01-10-2011, 12:21 AM	#58
skipdow View Profile skipdow Member Send Message Follow Blogs (0) Threads (96) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Member Trade: window and door installer Join Date: Nov 2009 Location: Vancouver BC Posts: 96	Re: Is Anyone Using Flat Rate For Any Of Their Employees? My business is run as piece work being paid by the UI(united inch) for windows and x dollars per single door etc. I am self employed subbing for the window supplier. I do however pay MY employees hourly etc. If someone is working piecework in my opinion they are subs not employees and that causes all kinds of problems about workers comp, insurance, taxes etc.

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