Should Construction Employees Pay for Part of the Company’s Vehicle Expense?

Question #1:

We are a design/construction company based in the Cayman Islands. We own several of your books and have attended one of your seminars. We listen to all your advice. We would just like to get your opinion and hope you will be able to assist us with this. What do you think is the proper percentage commission to give to an estimator/sales person? Also, if he has already received a maximum commission, should he still receive his wage? We provide vehicles to the employees. We pay for the registration, insurance and fuel for each vehicle, but is it right to deduct some part of that cost from the employees’ wages as they use the vehicles for their personal use, too? We really appreciate it if you could answer these questions. Thank you very much.

Hanna Bonzio,
Plam Builders

Answer: 

Construction estimators and sales people should not be compensated based on the amount of sales they generate. Instead, provide a base salary similar to a project manager’s plus an incentive commission based on the gross profit they bring into the company via their efforts. I would set goals for the estimator to secure at least enough work to pay for themselves from the gross profit times 300 percent. Example: if your estimator brings in $1,000,000 in sales at 20 percent gross profit = $200,000, I wouldn’t want their total compensation to exceed $200,000 / 3 = $66,000. But why would you want to restrict an estimator from bringing in more work by cutting their compensation? I would want them to make more money, so your company could make more, too. Regarding vehicles, most companies don’t ever allow personal use of company vehicles.   

Question #2:

I’m thankful that I’ve taken your seminars. Things are tough in Michigan, but I just came off of one of my best years and next year could be even better if a few projects click. I’m at the point where I may need to hire a project manager/estimator, but I’m not a good judge of talent and was thinking of using an employment agency that specializes in construction. What are your thoughts?

Jim Stringer,
S & T Constructors

Answer:

The employment agency will send you candidates for you to interview. You still do most of the work and make the decision. I suggest you use a web-based employment service such as Monster.com to list out your job requirements. You can then screen the applicants and e-mail them questions after reviewing their resumes. Then, you can interview them both over the phone first and then in person. If you take time and do it right, you will select the right person. Call their references. Walk a jobsite with them to determine if they know construction. Have them do an estimate or prepare a change order. Have them review some bids, look at some plans and then ask them tough questions. Have them bring in their cost history library for you to see. Ask them how they know their costs are accurate. Ask to see their list of completed contracts showing the bid versus final costs to see if they know how to estimate and run a job. And then if you do everything right, you might hire the right person 50 percent of the time!

Construction Business Owner, April 2008