An excerpt from the Compensation Conversation
The traditional compensation model for virtual support professionals is time for money – you get paid a specific amount in exchange for the time it takes you to do the work. This is how most virtual support professionals work with our clients, and for many it is the only way we have ever worked with our clients.
In my (oh so humble) opinion, there are a couple of issues with this model:
- Exchanging your time for money puts a limit on the amount of income you can make. Regardless of your hourly rate, there are only so many hours in the day, and so in order to make the level of income you want, you may have to work a lot of hours… usually more hours than you would like to work! We call this the time for money trap – and we hear from people all the time who are frustrated, overwhelmed and in some cases ready to throw in the towel on their business because they are working lots of hours for a limited income. Even if you raise your rate, you will still always be restricted by the number of hours you are able to work.
- The speed it takes someone to do their work will vary from person to person. What takes me 1 hour to do might take someone else 2 hours, or 30 minutes! There is a level of unfairness here on both sides.
- You as the support professional can essentially be penalized for being quick and efficient in your work. By being fast that means you are charging for fewer hours… as compared to the person next to you who did the same job and took more time in doing so.
- The business owner never really knows what they are going to be charged for the work being done! They will be charged more for someone who is slower in their work, compared to another person who may be quicker doing the same thing – and most times they don’t even realize this!
My own personal experience with this…
I personally have a pet peeve in regards to being paid hourly. Not only do I loathe having to track my time (yes, I will admit it), I believe a person’s value and contribution to the business simply cannot be measured in the time it takes them to do the work. What takes one person an hour could take someone else two hours to do – and yet the result of what they created in that time is the same and has the same effect on the business. And if I’m billing hourly that means I get paid less than the person next to me. Seems a bit unfair, right?
I saw this in myself years ago when I was still working a corporate job – for whatever reason I was much quicker at doing things than my colleagues were, and yet we were being paid the same amount. It mostly ended up that I did more work than they did in a day, which quite honestly was annoying to me. What was I going to do, stop working so efficiently and start slacking off? Not my style. 😉
So I decided that when I started contracting my services and working online that I would not be paid time in exchange for money. Outside of a couple of situations where I have gone down that road (and remembered why I didn’t like it) I’ve always been paid for the work that I do, not the time it takes me to do it. And in doing so I’ve not only been able to enjoy increased income and freedom, but more importantly have had the satisfaction of seeing how my work truly contributes to the growth of a business.
This isn’t of course to say abolish the time for money model all together… as it is actually a part of how we start working with our clients and get to know each other. It really is the simplest model of compensation and one that many of us use to varying degrees. However, we encourage you to start thinking beyond the time for money box – and look for circumstances and clients that will allow you to truly step into enjoying the success and profits of the businesses you are helping to grow.
We’ll get into the variations of incentive-based-compensation in a future article, but all the different types have at least one thing in common:
You, the support professional, get paid at least partly based on performance and results.
This is where the value comes in… the work that you are doing contributes to the bottom line of the business. What you do should either always be contributing to more sales/revenue, or to lowering expenses – both of which mean more money in the business bank account at the end of the day.
When you’ve successfully negotiated a situation where your client has agreed to incentive-based-compensation, you can confidently say:
“If my work directly or indirectly leads to an increase in the bottom line of the business, my pay will increase too.”
This can be a remarkably empowering thing!
Of course, that’s where the word incentive comes in. The better the results of your work, the more you’ll be rewarded. With incentive-based-compensation, you are motivated to work strategically and effectively because there’s something concrete in it for you.
Business owners on the other hand, can also gain a great deal of confidence when key team members are on an incentivized compensation plan:
“If I set up incentive-based-compensation for this person, I know I’ll be getting their best efforts directed at activities that impact my income. No more worry about getting dinged hourly rates for busy work that gets me nowhere in the big picture!”
Done well, it’s a mutually beneficial relationship <– love that!
Want to learn more about creating incentive based compensation? Be sure to check out The Compensation Conversation program which comes complete with all the tools, scripts, formulas and models to negotiate your incentive-based-compensation.