Thursday Apr 10, 2025

Episode 12: Performance Based Pay pt. 2

In this episode of the Huge Insider Podcast, host Sid Graef and guest Jared Skinner discuss how to create performance-based pay structures that motivate and reward high-achieving employees without sacrificing quality or compliance. You’ll learn about the importance of setting clear standards, understanding legal requirements (like the 7(i) exemption), implementing base pay combined with commission, and establishing guardrails to maintain quality. By tracking performance with dashboards and scoreboards, you can “gamify” your team’s efforts and ensure everyone is incentivized to perform at their best. These insights are especially valuable for service-based business owners looking to improve profitability, increase employee retention, and maintain high-quality services.

Show Notes

Transcript
Sid Graef (Host):
Welcome back, my friend, to the Huge Insider Podcast. My name is Sid Graef, and this is the Huge Insider Podcast. It is the show for home service professionals that are striving to break the million-dollar revenue mark. If that's you, you're in the right place. Now, if you're already over a million in revenue, guaranteed, you're gonna get even more out of the show.

So why do we say this is the show? There are a lot of people with big opinions and not so much experience. There's a lot of fake gurus out there, and we want to help you skip the B.S. and get real wisdom from experienced business builders. That's why we've gathered wisdom and insight directly from seven- and eight-figure business owners. These folks are running companies doing anywhere from two to forty million dollars a year. We bring you their best insights and experiences, all focused on a single topic each month. These are real owners—no armchair philosophers or fake gurus. They've done it. These are the ones quietly building empires behind the scenes. They're not on social media looking for attention; they're in business making things happen.

Last month, we focused on hiring A-players. This month, we answer the question: What do you do once you hire the right person? When you get your A-player, what do you do about onboarding, pay structure, training, and more? Today, we're diving back into performance-based pay: how do you structure your pay plan to reward, motivate, and retain high performers?

You're gonna meet Jared Skinner today. Jared owns a window cleaning company, a concrete coatings company, and a holiday lighting company, and they're all seven-figure companies. He probably owns more than that, and I don't even know about it. But remember, the goal here is to structure your pay in a way that is motivating to your employees and profitable for your company. This can be a tricky tightrope to walk. Everything Jared talks about is in the show notes. Just to be clear, he’s not an attorney or a tax professional—he’s a business owner speaking from experience. If there's a specific tax or legal question that comes up, talk to a professional. That said, the last thing before we dive in: we’ve got a downloadable action guide for you, and it’s available at thehugeinsider.com. With that, let’s dive into today’s topic.

Jared Skinner (Guest):
Everyone, welcome to the Huge Insider Podcast. Today, I'm gonna talk a little bit about pay for performance. There are a lot of different ways to structure pay scales in order to get paid for performance, and a lot of times we don't know exactly how to structure it or if there are rules for it or how it works. I kinda wanna give everyone a little bit of an overview of this structure.

Just to lay the foundation: when we first started, we always paid an hourly rate. The problem I always had was employees would come to me saying, “Hey, I think I need a raise.” I'd look at their performance and say, “Man, if you would clean more windows in a day, then I can pay you more.” And they'd say, “Well, if you pay me more, I'll clean more windows.” It just seemed like this battle over and over—trying to figure out how much people were worth and how much we could pay them.

We decided to shift into a performance-based pay structure, more of a commission base. Once we decided to do that, our employees instantly made an extra four to five dollars more per hour as soon as we shifted, and their production rates went up significantly. The great thing about this structure—what’s really beneficial—is that people, in a sense, are almost in charge of their own pay. They don't need to come to you to ask for a raise. When you structure the right pay system, they place themselves right into the pay structure they deserve. It was better for everybody. We did better as a company. We had way more production, and the guys were making more money. What it really does is weed out people who just want to show up and punch the clock.

It’s important to know how the structure works, and there are a few legal things out there that you need to know about as well. There’s what's called a 7(i) exemption. It basically allows you to pay commission. If you pay straight commission, you don't have to pay overtime if you meet certain criteria. One is that you're in a retail or service-based business, which we are. Number two is that 50% of the employee’s pay is coming from commissions. The other thing you need to know is that, if you're paying strictly commission and not overtime, they need to be making at least 1.5 times the minimum wage in your state. If your minimum wage—for easy math—is $10 an hour, then they need to be making at least $15 an hour (1.5 times) to avoid paying overtime. You have to keep records of the hours worked, the commission earned, the total pay for the week, and whether it meets those criteria.

When you get into commission-based pay and performance-based pay, keep that in mind. What we've found is that people really like it. You start to attract really motivated people, and when you show them the potential, they can get hungry and produce some really nice numbers. One thing I've learned from experience is that if you're not careful, they start to go too fast and compromise quality a little bit. You have to put some guardrails on. If you don't, they’ll do really fast work, get a lot done, but it’s not very good, and you’ll get more callbacks. So you have to learn to put guardrails on.

Let me give you an example of how we do that and how we structure our pay to stay in compliance with the things I've discussed and to keep people on track. Number one, we start with giving our employees a base hourly rate. Ours is almost like a combination: it's a minimum base hourly rate—let’s say $18 an hour—or commission, whichever is more. We give them a few months to get up and going, and if they're not making more than the $18 an hour on commission after a few months, we move on and look for other people. That person doesn't really care and isn’t that hungry, so we don't want them. We have a standard, and that's where it’s set: base hourly or commission, whichever is higher.

That’s not the only thing we do. To qualify for the highest commission rate, we tier our commissions—22%, 24%, or 26%. Then we have guardrails, right? Guardrails might be no callbacks, showing up on time, taking before and after pictures to prove we did everything correctly, completing your full checklist, asking for a customer review, etc. If you do all those things during the day, you qualify for your commission. If you get a callback, you don't qualify for the commission and you get the base hourly rate for the day. That’s the way we structure it to help keep people in check, which works really well because it doesn't take that much longer to do a good job and keep clients happy.

If you haven't dove into performance-based pay, there are a lot of ways to structure it, but this is what we’ve learned. To recap:

  1. Your production rates for all employees are going to go up—a lot—if you do this correctly.

  2. Make sure you are falling within the 7(i) exemption. Research it and set yourself up properly.

  3. Keep really good records. We’ve had the Labor Department called on us, we’ve been audited, etc., but we have detailed records, so we were fine.

  4. Put guardrails on to maintain quality.

  5. Have a way to track it all, with something like scoreboards. When you gamify it—display production rates, upsells, and so forth—people don't want to be the worst. We have a standard: if you’re above this number, you’re in the green; if you’re below that number but above this other number, you’re in the yellow; and below that number, you’re in the red. All our technicians can see if they’re red, yellow, or green, and it really motivates them.

When you start to gamify it, it makes a big difference, and it gets fun. The guys really enjoy it. So if you haven't done performance-based pay, you should definitely look into it. There’s a ton of ways to structure it. These are the ways that I've found to be most successful. Hope that helps everybody. We'll catch you next time.

Sid Graef (Host):
So what did you learn about pay structure and performance-based pay? More importantly, what are you going to do with it? These strategies are simple but powerful. The foundation of every successful business is key employees who do great work, who you can retain, so they can continue to perform. That cohesiveness moves your company forward.

So here we go—what are your next steps? Take action. Everything we covered today is in the show notes, but the most important thing is your downloadable action guide. It’s a summary of today’s episode with bullet points and how to implement it in your company. We put together a five-page action guide to help you execute this week’s strategy, and you can grab it at thehugeinsider.com.

Here are a handful of other ways you can level up your business:

  1. Join our free newsletter, also called The Huge Insider. We give weekly insights straight to your inbox, and sometimes feature trusted partners—people with a product or service for home service businesses that we’ve used and find valuable. That’s also available at thehugeinsider.com.

  2. Facebook group: Find it at thehugeinsider.com or search “Huge Insider” on Facebook. It’s a vibrant community where people help each other. We often do pop-up Q&As and ask-me-anythings with our seven- or eight-figure owners.

  3. The Huge Convention is the Super Bowl event for home service businesses. It’s a big celebration and a time to learn how to grow your business. It’s the ultimate event for home service business owners, and a place where breakthroughs happen. This year it’s in Nashville, Tennessee, August 20th through 22nd. Tickets are not expensive, but the price goes up on May 1st. You can get them at thehugeconvention.com.

    • This is where real breakthroughs happen. It’s the place for networking, education, and the biggest trade show in the industry for exterior cleaning and holiday lighting. This year, we’re doing something ridiculous the day before the convention—on August 20th—we’re calling it Christmas in August. If you’re looking to add revenue to your business, or keep your team busy in the winter months while adding profit, holiday lighting is phenomenal. We’ll spend an entire day on how to sell, price, install, and profit from holiday lighting. Just come one day early, also at thehugeconvention.com.

  4. The Huge Mastermind: If your company’s already over a million in revenue, you’ve got more than five employees, and you want to grow and scale—like going from 1 million to 5 million or 1 million to 10 million—this is the fast track to a freedom business. You’re going to learn and implement the Freedom Operating System to get time and money freedom predictably. We generally open the doors for the Huge Mastermind once a year in August at The Huge Convention. If you want to get on the waiting list, go to thehugeconvention.com, scroll down, and hit “Mastermind.” All the information’s there.

That’s it. Thank you so much for listening. Really appreciate you taking the time. If you find this podcast valuable, share it with friends, post it on social media, and leave us a review. If you have a topic you’d like to see covered, or a success story—or a failure you learned a ton from—call us the old-fashioned way at (804) 600-HUGE (804-600-4843). Leave us a message, tell us all about it, and we might just feature you on an upcoming episode.

That’s it for this week. Don’t just listen—take action. I’m Sid Graef, this is the Huge Insider Podcast, and we want to help you win and prosper in the marketplace. We’ll see you next time.

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