You job probably does not matter much, when it comes to how much you would like to be paid. Most of us would like more money, but what is fair? What is right? Some argue for a minimum wage: but if the employee does not produce profit, minimum wage means do not hire to a business owner. A technician in a quilt shop recently asked me what was fair pay in her situation.
To answer this question, the employee and business owner must keep in mind the basic employment rationale: Employees are hired to produce profit for their owners. The money paid by customers is income. The money paid to employees and all the other expenses are outgo. The profit of the business consists of what is left over after subtracting the outgo from the income. Employment depends of producing profit. Make sure you pay your employees what they are really worth.
If you provide services to customers, you have to set some kind of rates to charge for those services. To calculate the charge rates, the business owner must determine exactly what expenses will be required to serve the customer. Once the expenses are known, it is easy to add a bit for profit, and do business.
To properly determine what to charge your customers, the business owner must know all the expenses required to serve the customers. You may have to pay $1.00 per square foot per month for a place to work, plus tools, equipment, supplies, and labor. If you expenses add up to $600 per month and you provide 60 services, your cost is $60.00 per service. Your charges must cover all your expenses plus provide profit to the business.
Therefore it is essential to identify all costs and the number of services done per month to determine the real cost to service each machine. If the owner intends to maintain a 25% profit margin in the service department, then it is easy to set your rates accordingly: Costs Per Service + 25% = Rate.
Keep in mind that the bills keep coming even when the repair services may not. Slow downs are natural, but painful. Therefore, add a little extra to the charge rate as a buffer against slow downs.
When it comes to pay, it is natural to want more and to give less. Unfortunately, this does not work. As a rule of thumb in our sewing machine repair business, we believe a technician needs to produce at least four times the income as they receive in pay. If a typical service charge is $100, the employee should receive about $25. If it is performed in one hour, the technician should get $25 per hour. If, however, it takes four hours to perform the service; the employee should get $25 for the four hours or $6.25 per hour.
Now lets take a look at the big picture from the business perspective. We have identified our cost per service of labor and of other expenses. We might calculate it this way: Charge Rate = Msc. Expenses + Labor + Profit + Buffer. Now if we subtract say 30% for profit and buffer, we are left with our maximum allocation for labor and expenses. If expenses rise, the charge rate must rise or the profits will decline.
The worth of an employee should be objectively measured. An $8.00 per hour employee who takes 3 hours to do a job actually costs $24 per job. A $15.00 per hour employee who completes the job in 45 minutes actually only costs a little less than $15.00 per service. Which employee is the best investment for the business?
The customer usually is not interested in how much time it takes or how much effort it requires to meet their needs. They just want the job done. I am often amazed by the customer who brings their sewing machine in for a service and want to wait while we fix it. When we explain that it may take all day, they respond in shock. The average sewing machine tune up takes all of two and a half hours, but some can take all day. The beginning technician will require more time, while the experienced one can do the job in half the time.
The level of pay should be calculated by how productive the technician is in terms of generating profits.
Which employee would you hire? Would you hire one that you pay $8.00 per hour, and that produces one repair every four hours? Or would you hire the one that you pay $15.00 per hour who produces a repair every hour on the hour?
Your business will thrive if you pay your employees what they are worth and keep control of all your expenses while charging appropriately for your services. You cannot give away the ship without sinking. You cannot expect high producers to work for peanuts.
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