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Bonus Plan for the Lead Carpenter

Labor Bonus:

1. Develop a labor budget using the HomeTech estimating system.

2. Add the judgment labor estimate.

3. Once the total labor budget is figured, develop a breakdown of each item and a total figure. Emphasize to the lead carpenter that the labor budget reflects the normal inefficiencies of the business and is a "flat rate" based on average productivity. In other words, it is designed to enable the top carpenter who works efficiently to beat the rate.

4. Break down the total labor budget into hours for the typical lead carpenter, including fringe benefits.

5. Review the figures with the lead carpenter and mutually agree on the final budget figure.

6. If the actual labor figure is less when the project is complete, the company and the lead carpenter will split the savings. For example, if the labor budget is $4,000 and the actual figure is $3,600, then the lead carpenter is paid a bonus of $200.

Overall Bonus:

In addition to the labor budget, the lead carpenter has an opportunity for an overall performance bonus. If the lead carpenter comes in on budget and on time, and the customer is completely satisfied, the lead carpenter gets the following bonus:
  • 2% of first $10,000.
  • 1-1/2% of second $10,000.
  • 1% of anything over $20,000.
If the project was $8,000, and the conditions above were met, the lead carpenter would get a $160 bonus (2% of $8,000). On a project with a budget of $18,000, the lead carpenter would receive a bonus of $320 (2% of $10,000 or $200 plus 1-1/2% of $8,000 or $120).

Change Order Bonus:

If the company charges an administrative fee of $50 for change orders, the lead carpenter gets $25 of this fee for writing up the change order contract, getting the customer to sign it, and collecting payment for the additional work.

On each change order, the labor is computed and added to the total labor budget for the project. The materials required for the change order work are also figured. If the change order is completed on budget, the lead carpenter gets another 2% of the value of the change order as well as half of the labor savings per the base labor bonus.

It is important to compute the additional time required for each change order and add it to the total labor budget for the project so that the completion date for the project remains realistic.