With health care costs through the roof, how do I design a competitive employee compensation plan while still making a good ROI per job?
I’m going to answer another question here. I’ve got to read this one to you. It’s a long question but I haven’t answered this one in ages. Let me read this one to you. “I’ve been running a business since 2004 and have grown every year. We will hit 500 grand in revenue this season. Each winter I reflect on the past few years and plan for changes and new plans for the upcoming season. One of the issues I ran into this year for the first time was a lack of employees. I pay better than, or as good as anyone in the industry in our area, but when it comes to retaining the long-term people … ” I’m reading from my phone here so forgive me for this. They got a little bit more to go here. Basically, he’s saying “when it comes to retaining long-term people who may see this work as their carrier, I’m afraid I am coming up short. So far I have been lucky. My first hire was a 15 year old kid and he’s now 25 and still working full time. He will find a job in his area of interest soon.” So that will mean a transition, meaning that he won’t be working for the fellow who’s asking the question.
“I’ve been adamant about not offering healthcare plans. For one, when they increase in price, the employee isn’t thankful for the raise. Second, I think businesses offering healthcare plans contribute to the plan of people disconnected with the true cost of healthcare and unwilling to negotiate or seek out better options at lower costs like a free market should function. That being said, finding and keeping long-term employees is going to be very important moving forward. I am open to just about anything that will fit within my abilities to make a good ROI per job. You’ve dealt with these issues and I’d covet the opportunity to hear how you’ve worked through this and structured your competitive employee compensation plan.”
I wanted to read the whole question because there’s several layers to this question. Jeez, I hope I can remember the whole thing. I may have to look at it again here. Let me start with the part that resonated with me first: healthcare. Boy, I couldn’t agree more that a big part of our problem in the United States is the fact that the individuals that we employ, that we buy healthcare for, haven’t the faintest freaking idea what that costs, nor do they have the faintest freaking idea what it costs to go buy a prescription and what the health insurance companies are being billed. This is my rant. They’re watching the ads on TV for the little whatever-colored pill and then they are saying, “Hey, I got to have that thing,” and that thing’s costing 200 bucks behind the scenes. It is just a giant disaster, in my opinion. I agree, totally agree, couldn’t agree more.
The problem is that you might feel strongly on that position, but what are you going to do if you want to compete? I’ll give you a case in point: Service Autopilot. We have 45-56 employees here at this exact moment. I couldn’t imagine if we didn’t offer them health insurance. We wouldn’t even be competitive. We’ve got some very expensive, very talented people that could go work elsewhere. If we didn’t offer them health insurance because of my argument that, you know what, if I offer health insurance I’m perpetuating the problem, then I wouldn’t have the level of people that we have. I would just be out of luck. Yeah, I agree, but at the same time, I have to play the game, and I think you sort of have to play the game. You fight the problem from a different angle.
One way you could fight the health insurance problem, and it just doesn’t solve it, and you won’t be doing this in your business, but if I’m paying full health insurance for a family at my company, Service Autopilot in this case, 1,700 bucks a month. That’s if they’re not too old. A family in their late 30s, 40 years old, that kind of range, with two kids is 1,700-1,800 bucks a month. One way you can demonstrate that to them is when you lay out their compensation package. Again, you’re right, they won’t appreciate it … not because they’re selfish, just they don’t understand. They haven’t been educated that you’re actually paying them their salary of … let’s call it 65,000 a year plus $1,700 a month, plus you’re paying dental insurance, plus you’re paying vision, plus you’re paying bonuses, plus you’re paying training. You can go down that list.
The approach that some companies have taken is they literally itemize all that stuff out. You can have that stuff itemized out on their payroll statement so it prints out on their payroll stub. You can lay that out to them every year in their compensation or every six months and remind them here’s all the things we’re paying for. Yes, you make 65,000, but to the company, with labor burden, with all these other expenses, you’re costing our company $89,000 a year. If you were to strike out on your own and go out on your own in business, you would basically, to get back to where you are currently today working with me, you’d have to make $89,000 a year. You can actually lay some of that out.
I think that you have to play the insurance game in certain businesses when you get to a certain size. No way around it, because you just simply won’t win the game. Other companies will do it. Anyway, I’m going to leave the insurance topic alone. That’s my argument on that. I don’t see any way around that completely. Also, we’re in lawn care, pest control, these different industries. The reality of it is that we are fighting for our lives to hire people because most people are wanting to move up the ladder and move into other jobs. The reality is that we might pay more money than an office job, but some people just simply don’t want to be out in the heat or out in the cold these days. We’re fighting that. There’s a lot of challenges we’re fighting.
We’re also fighting the stigma of a dad who says to his kid, “Hey, I don’t want you to work at a lawn care company or a pest control company. Go get a computer degree. Go do this. Go do that.” Because they don’t understand that being in the lawn care industry or the pest control industry is super respectable and there’s a lot of skill and knowledge and talent that goes in this thing. There’s that social pressure as well. We’re fighting all of those things. The way you counteract that is you become the company that, when needed, pays health insurance. You become the company that finds creative ways to be able to pay more. That means you have to be, not the highest, but one of the higher-priced companies in your market so that you can afford the best people. It means that you find ways to, again because you are not the cheapest provider in the market, have the money to train, to do the special little things for the team, to surprise the team with things, to bring food in, to do company lunches. It doesn’t have to be super expensive but what are all those little insignificant things that you could do that aren’t that expensive?
Instead of giving a team member an $800 raise, could you surprise them with a gift to go on a trip that you’ve heard them talking about for three years? Or, help them put a down-payment on a car that you know that they need? Some of those things are almost more valuable than just throwing a little bit more money at them. My personal opinion is you want to be the employer that people want to work for. One, because you legitimately care. You really want them to do well. Then you look for ways to help them. Then you look for ways for your company to become more profitable and charge a little bit higher rate so that you can pass some of that money back on to them.
At our company, my attitude isn’t … I want to make more profit and I want to keep our margins really strong, and I want to grow our margin, but at the same time, if we can make more money that can filter down to our team, all the better, because hopefully that team will stay with us longer. If they stay with us longer, we’re a better company because turnover is expensive and the knowledge that gets sucked out of your business when you lose people is painful. If I can keep the team longer, great. I don’t necessarily need to be greedy for an extra point or two in margin. I’d rather push some of that money down to the team so that they are more likely to stay with me.
That doesn’t mean it has to always be in pay. Again, it can be in perks, little extra things, training. A lot of people want to grow in their positions. The other simple argument I’d have for you, if you want to retain people, you’ve got to grow the company. You’ve got to build a company. If your company isn’t going to hit 500, 700, or 800,000, it’s going to stall or it’s going to go from 500-800,000 over five-six years, there’s no real growth opportunity with that company. People want to work for the successful, growing company with opportunity. They want to feel like they’re part of something. They want to feel like they’re part of something growing bigger. They want to feel like they’re part of something doing well.
Does your team know that what you do is really valuable? We do something greater than just mowing lawns or killing bugs or cleaning the pool. There’s actually more value than that to what we’re doing. We are taking things off of our clients’ plates so that they can have time with their families, so that they can go on vacation. So that they can focus on whatever that great thing is. Maybe some of your clients do something really important in healthcare or business or the medical field. Every minute you free up of their time to spend with their family or to work in their profession which helps other people, is really valuable.
What we’re doing is actually really important. They need to understand that. I think a team that believes that what they’re doing is of value and sees that, and we have to tell them and show them that it truly is, we’re not just making this up, then they’re more likely to stick around. They’re more likely to put value in the profession that they’ve chosen to be a part of. Then you’ve got to give them growth opportunity. You’ve got to find ways to pay them more, and give them more perks, and take good care of them, and be that great boss. That doesn’t mean the guy that rolls over and takes whatever from the team, but the person that is legitimately good to them and firm when necessary.
I hope that helps. Find all those little perks that you can pass their way, bonuses, whatever. Try that, because that’s what I’ve found has worked for me. There’s no single magic bullet. It’s a combination of tons of little things. At the end of the day, a lot of it’s just about being a company that they want to work for. What does that mean in your market?