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If you want productivity, pay by the hour…

Every month you pay the same, whether Janice from accounting balances those accounts or spends the first two hours of her Tuesday morning updating her new Instagram page promoting her frightfully unimpressive sketches of her Pomeranian, Princess Fluffingston.

Every month you get paid the same, whether you work 18 hours straight or if you’ve been reading up on the top 10 easiest ways to remove a questionable mole you found on your back with common household utensils during the third of your usual seven toilet/coffee/tea/I’m-too-bored-to-sit-at-my-desk breaks.

Paying someone a dedicated amount each month as a salary, with no possible chance of variation, provides certainty to both the:

–         employer in terms of how much money is leaving the company each month through payroll; and

–         employee in terms of what’s arriving in their bank account each month so they don’t default on the property they remortgaged to pay for little Stephanie’s MTV inspired “Sweet 16”.

What it doesn’t do, however, is provide any sort of drive for your employees. Unless Jim from purchasing seriously under performs, he can essentially do as he pleases during his ever enthralling 9 to 5 shift. All Jim needs to do is stay in that sweet spot of being just useful enough to not get fired and just useless enough to never get promoted. Unsurprisingly, this sweet spot requires minimal effort to attain and maintain.

Obviously, this isn’t the case for every company, and a lot of companies have a number of performance based incentives to encourage their employees to really excel and put in the extra time and effort. But some of these companies also have unattainable thresholds.

In the legal field, a bonus is often given if you double the minimum billable hours you are required to achieve in any one year. That minimum is what most people in any other industry would consider as extreme levels of overtime – so the bonus option is a fairy-tale.

As someone who has worked as both a salaried employee and as a consultant who earns an hourly rate, I can attest to the drive that hourly earnings provide.

Knowing that you earn hourly means your day becomes significantly more valuable, both to you and your employer.

As soon as you start breaking your day down into valuable 60 minute chunks (or, in the legal world, 6 minute bites), you start realising how much you can actually achieve in short periods.

Now this model definitely works better in certain industries – specifically where there is a large work load. It also allows employers to obtain relevant data on how long particular tasks are expected to take, which also prevents intentional delays by employees to increase their hours.

Where this “pay per hour” model really excels is in a company’s support services, such as accounting or legal. This reduces costs across the board and ensures you only pay for the services as and when you need them.

More and more companies are realising that these support services can be outsourced and, when using a consultancy firm/smaller firms, can be done at a fraction of the price by individuals of high professional standing, especially when the services required are your day to day typical in-house offerings.

This reminds me of another brilliant, awe inspiring and revolutionary article, which you should read by clicking here.

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