MSP question of the week: Strategies for Determining Employee Compensation

from the SMB Community Podcast

Determining the right amount of compensation for employees is a complex issue that many businesses face. In a recent podcast, Amy and James discussed their thoughts and strategies on how to compensate employees. The discussion revealed a wide range of compensation for the same skill set, with some employees being paid as little as $38,000 and others as much as $110,000. They agreed that this range was too wide and that there should be a narrower understanding of how much people need to be paid to work in a particular industry.

One of the factors that Amy and James discussed was the importance of reverse engineering the amount charged to the customer to determine how much an employee should be paid. This involves considering the amount of time an employee will be working for a customer and the percentage of their time that will be spent on billable work. They had a goal of 80% productivity, meaning that 80% of an employee’s time should be spent on billable work.

Another factor that was discussed was the importance of rewarding performance. This could involve having a salary plus a bonus plan based on utilization and revenue generation. It was also important to ensure that employees were not just closing tickets as quickly as possible, but that they were actually solving problems and providing value to the customer.

Overall, the Amy and James agreed that determining employee compensation is a complex issue that depends on many factors, including the service offerings of the business, the average billable rate, and the location of the business. By considering these factors and using strategies such as reverse engineering and rewarding performance, businesses can determine the right amount of compensation for their employees.

Have a listen to this MSP question of the week.

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