Bonus Manager: Managing a Successful, Balanced Performance Incentive Program with Chronicle

 

Chronicle's Bonus/Commission Manager lets you design a powerful performance incentive plan that takes into account not only profitability but also completion, payment status, customer satisfaction, and job file management.

Benefits of a Good Incentive Program

A good incentive program increases your company's profitability while also resulting in more satisfied employees. Here's how it does this:

An employee who receives only a salary or hourly pay doesn't have a huge incentive to work quickly or efficiently. Whether a particular step takes three hours or six really doesn't make a lot of difference. Extra breaks or pausing to chat during the day may make the day more pleasant, and they don't cost employees anything, since employees get paid the same either way.

A good incentive program pays employees extra for profitable, well-managed jobs, while give no bonus or reducing the bonus for poorly managed or unprofitable jobs. This gives employees reason to work efficiently. Your company benefits by having more consistently profitable jobs instead of jobs where profit's eaten up by labor costs that are too high. The company also benefits because, with employees working more efficiently, the same number of employees can do more jobs: this lets you produce more profit without increasing your overhead.

A good incentive program also results in happier employees. In addition to getting their base paycheck, each month they get something extra if they've worked well. Keeping the employees happy benefits the company as well: more satisfied employees means lower turnover. Hiring and training new employees is expensive, so keeping your employees happier in the long run saves you money.

Testing and Evaluating Your Incentive Program before you Implement It

Set up your bonus rules following the guidelines here, and have calculate bonuses with Chronicle for a month or two before you announce the program to employees. Compare the bonuses calculated with the actual profits on each job to see if the rules work for your business. Bonuses that are too high will keep your company from being profitable. If they're too low, they won't be a real incentive to employees. Adjust the rules if needed before you announce the new bonus program to employees. We've offered sample percentages below. These figures have worked very successfully in particular businesses, but don't take them as gospel; they may not be exactly right for your business. Don't announce the program until you have tested it and are satisfied with the results.

Read this Document First

Setting up a successful bonus program requires a clear understanding of a variety of business conditions. Chronicle automatically applies business rules and makes your incentive program easy to manage once you set it up, but there are no shortcuts to setting up the right rules for your business. Different areas of the country have different labor rates, different volumes of work, different fixed operating costs, different competition, and so on. And different businesses have varying roles: in one business, the project manager is involved with sales; in another these roles are covered by different people. While the same general principles apply, there are differences from business to business; we recommend reading this whole set of instructions before you set up your bonus program

Essential Elements to Consider

While there are variations from business to business, these conditions almost always apply:

 

Explanation

How Chronicle's Bonus Manager Handles This

Work completed

Until a job is completed (and has been complete for a number of days), you don't know how much additional labor will be, whether the customer will call with complaints or call you back for repairs, and so on. Work must be done before you can effectively evaluate whether a bonus is due.

Completion status, whether the money is paid, and whether the job meets your rules for profitability/labor rates are all handled automatically by Chronicle's collections manager based on the rules that you set up.

Money collected

While some companies pay bonuses when a job is invoiced, we don't think this is good practice. Even if your employees did the job well, if the customer ends up refusing to pay you, you lost money on the job, so there's no profit to share. (You might make an exception to this for bonuses for sales people who are bonused based on the number of jobs they bring in.)

Profitable

The job must meet or exceed gross profit or labor percentage requirements to be eligible for bonuses. Jobs with very low profit or very high labor rates may call for negative bonuses.

Well-managed

In addition to being profitable, to qualify for a bonus, a job should be well-managed. Activities should have been completed on time, documents should have been added on time, and so on.

In the bonus manager, Chronicle shows on-time status for the department, documents, and activities, and % of days that actually had events scheduled. The setup lets you define acceptable percentages. These things give a good indication of how the job was managed.

Good customer service

Doing a job cost effectively isn't so good if the customer was dissatisfied with your service and gives negative recommendations to others. On the other, a job that yielded a very happy customer may be worth some extra bonus.

Chronicle's bonus manager shows both job feedback and survey results that contain customer satisfaction information. (The bonus manager setup lets you identify which survey has customer satisfaction info.) Chronicle allows you to override the calculated bonus percentages based on this information.

 

Other Potentially Important Factors and Recommendations

Not every business will use these features, but for some businesses these are also important.

 

Explanation

How Chronicle's Bonus Manager Handles This

Distinction between work sources

Some work comes in without much effort; other work requires ongoing effort by your employees to bring the new work in. Especially for employees who are responsible for bringing new work in, you can offer higher percentages on work sources that require more effort to bring in as opposed to work that comes in without much effort on their part. (For example, companies that distinguish between program and non-program work often pay a higher bonus on non-program work because this requires more employee effort, and expanding this work expands the business.) In addition, some businesses have work from particular sources that tends to be less profitable. (Work from property management companies is often in this category.) If work is less profitable, you simply can't afford to pay high bonuses on that work.

The Effect of Job Source settings tab lets you determine whether job sources have an effect and which sources are grouped together for bonus purposes. If you indicate that job source can have and effect, then when you define bonus rules, you can indicate whether the rule applies to all sources or just to jobs from a particular source.

Different bonuses for different employees

Businesses sometimes give different employees different bonus rates based on agreement at point of hire, based on different base salaries, and so on.

The Employee Eligibility setup tab lets you indicate whether particular employees Use Custom Bonus Rules. If you set this to Yes for any employees, you can then create custom bonus rules for those employees.

Departmental bonuses

While occasionally companies bonus on the job as a whole, we recommend separate bonus rates for each department since different departments usually have different profit and labor rates. For example, the gross profit you expect on a construction job is quite different from what you expect on a water damage job.

You can set up bonus rules for the job as a whole or for individual departments depending on what you choose on the General Settings tab in the Setup. We strongly recommend departmental bonuses unless every department has identical profit and labor rates.

 

 

Using Chronicle's Bonus Manager, Overview

 

One-time setup: You must define each of your bonus rules to determine for each department how much to pay each role and what acceptable profit/labor rates are

Calculating Bonuses: Either monthly or in each pay period, a person who is responsible for calculating, adjusting, and approving bonuses will open the Bonus Manager and go to the Bonus Calculator and run the report to determine what the bonuses should be for any newly eligible jobs. After reviewing the bonuses and making adjustments if needed, that person will post the bonuses.

Reviewing Approved Bonuses: The Review Approved Bonuses tab lets you see bonuses that have been approved. Employees who don't meet the security level to see bonuses for others will only see their own bonuses on this tab. The person responsible for payroll can review this report and group bonuses by employee to see what each person is due.

Getting to the Bonus Manager

To get to the Bonus Manager, go to the Financial tab and click Bonus Manager in the toolbar at the top of the screen.

 

For ease of use the Bonus Manager will stay in the Windows Taskbar to make it easier to return to.

 

You can also add the Bonus Manager to the reports list on your Home page by clicking Save Report Conditions in the header of the Bonus Manager. (This is the same as for any other saved report in Chronicle.) This lets you get to the Bonus Manager from your reports list.

Security Controls

The Security tab in Chronicle's main setup lets you adjust these security contexts if you want to change who can use different parts of the Bonus Manager.

 

This context controls whether the user can...

Default Security Level

CommissionReportMarkPaid

mark an approved bonus as paid (generally only the person who responsible for payroll should do this)

6

CommissionReportRunPost

calculate bonuses, adjust bonus amounts, and approve the bonuses

6

CommissionReportSetup

change the rules and other setup for the bonus program (generally only an owner should be able to change the bonus program rules)

7

CommissionReportViewForOthers

see the bonuses for others (generally only managers and people responsible for payroll should be able to review bonuses for others)

6

CommissionReportViewForSelf

view his/her own bonuses

2

CommissionReportUndoPost

allows user to undo the posting of a bonus

7

 

Setting the Bonus Manager Up

 

The setup for the Bonus Manager is potentially quite complicated, but you only need to do this once. Once the setup is done correctly, a single click of a button will calculate all of the different bonuses each month. Setup is divided up among a number of tabs; here's a summary of what each of the tabs contain:

General Settings: What you call bonuses, whether bonuses are department based or for the job as a whole, when your program starts, how paid jobs must be to qualify, and how long a job must be complete before calculating bonuses.

Effect of Job Source: Whether job source affects bonus amounts, and if so, how the job source categories are grouped.

Job/Departmental Rules: Here you define the rules that determine what bonuses to pay.

Employee Eligibility: Whether employees are eligible for bonuses, whether bonuses apply to employees who have left, and whether employees can have custom bonus rules.

Highlighting: What percentages are exceptional, acceptable, need improvement, and unacceptable for departments on time, documents on time, activities on time, customer satisfaction, and calendar event usage.

Job Feedback & Satisfaction: Which survey(s) contain customer satisfaction and how negative feedback should affect bonuses.

Labor % Calculation: Whether labor burden should be factored into calculations when seeing if labor rate percentage qualifies for a bonus.

Overrides to Calculated Amounts: Whether someone calculating bonuses can override the amounts calculated, whether they must give a reason for the override, and what the stock reasons are.

Each of these setup tabs are explained in more detail below. To be able to see change the settings screens, you must meet CommissionReportSetup security context.

General Settings

The General Settings tab in the Bonus Manager Settings looks like this:

Term you use for Pay Incentives: Enter Bonus, Commission, Incentive, or whatever you call the incentives. The report and various options within it will be renamed based on what you enter here.

Department vs Job Bonuses: Indicate whether you calculate bonuses separately for each department or for the job as a whole. We strongly recommend separate bonuses for each department since different departments usually have different profit and labor rates. For example, the gross profit you expect on a construction job is quite different from what you expect on a water damage job. Bonuses for the job as a whole are slightly simpler to initially set up, but they are only useful if every department has identical profit and labor rates.

Bonus Program Start: Enter the start date for your bonus program. This prevents Chronicle from trying to calculate bonuses on many years worth of past jobs. You may want to put in a start date of a few months before you actually begin, however, so you can test your rules for a month or two before you actually begin.

Calculate Bonuses when Departments are: For rules that require the department be paid, you are indicating what percentage has to be paid to be close enough. While we believe that it's best practice to have jobs paid before paying bonuses, sometimes a job gets mostly paid, but has a small percentage of the job unpaid while you quibble with an adjuster over minor amounts or while you try to collect the last $100 of deductible from the customer. Since these final amounts sometime take months to resolve, putting something less than 100% here lets employees get their bonuses in a more timely fashion once the job is mostly paid.

Departments Become Eligible for Bonuses: For bonus rules that require a department to be completed, invoiced, or paid, you are determining how long the department has to be completed before being eligible for the bonus. We recommend 30 days to allow time for expenses to be entered in QuickBooks, to allow for any customer callbacks that might occur, and to allow for time to get any final customer feedback.

Effect of Job Source

Some work comes in without much effort; other work requires ongoing effort by your employees to bring the new work in. Especially for employees who are responsible for bringing new work in, you can offer higher percentages on work sources that require more effort to bring in as opposed to work that comes in without much effort on their part. (For example, companies that distinguish between program and non-program work often pay a higher bonus on non-program work because this requires more employee effort, and expanding this work expands the business.) In addition, some businesses have work from particular sources that tends to be less profitable. (Work from property management companies is often in this category.) If work is less profitable, you simply can't afford to pay high bonuses on that work. If you make a distinction between different job sources,

The Effect of Job Source tab in the Bonus Manager Settings looks like this:

 

Impact of Job Source: Indicate whether job source can affect bonus rates.

Job Source Bonus Plans: If you pay different bonus rates for jobs from different sources, enter a description for each different rate scheme. (A company with 20 different job sources probably only has a few basic payment schemes; rather than creating 20 rules, one for each actual source, this lets you create a rule for each bonus play. Program work and Non-program work are the most common rate distinctions.

Indicate which plan applies...: Once you've defined the different plans that affect bonus rates, indicate here which plan each job source is associated with.

Job/Departmental Rules

The rules tab will be named Departmental Rules if you indicated on the General tab that rules are department specific; it will say Job Rules if you indicated on the General tab that rules apply to the job as a whole. This tab looks like this:

       

This screen lists all of the rules that you've created so far. The buttons at the top let you add, copy, edit, or delete rules.

Rule Add/Edit

When you add or edit a rule, you see a screen like this:

 

Department/Role: Pick the department and role that the rule applies to. For the roles, you will see hourly labor and the roles from the Job Roles tab in the main setup that can apply to employees. (If you see roles in this list that overlap or that you don't use, we recommend cleaning up the job roles list. You don't want employees to miss bonuses because an incorrect role was applied on a job.) Also indicate whether this rule applies to any employee in that role or only to one specific employee. Some companies have agreements with specific employees that require custom bonus rates.

Applies to jobs:  Indicate whether the rule applies to jobs from any source or only from one particular source. The different job source plans are defined on the Effect of Job Source tab.

Pay % of: Indicate what to pay a percentage of.

Pay this after...: Indicate when to pay the bonus. In most cases, we strongly recommend not paying a bonus until you have been paid, that is, after the money is collected. Even if a job was well-done, unless you can collect the money for it, you didn't actually make any profit. Bonuses for sales/marketing are an exception to this: sales bonuses may be paid when the job is added or completed.

Based on: the bonus can be based on either the gross profit % or labor rate. Most commonly, salaried employees bonuses are based on gross profit, and hour employees are based on labor rate.

Calculate... based on: Calculate the bonus based on invoiced or paid (collected) amount.

Percentages and rate to pay: Enter rates based on what you want to pay. You can add additional tiers by having bonuses that begin/end at something other than 100/0. For example, if you have a positive gross profit bonus that shows 100-65, if you changed that to 75-65, Chronicle would automatically add another tier that shows 100-75.01. Similarly if you changed 75-65 back to 100-65, chronicle automatically removes the higher tier. For guidelines on what percentages to use for each type of employee, see the Sample Bonus Percentages below.

Once done, click Save Rule to continue.

Employee Eligibility

The Employee Eligibility tab lets you determine whether employees are eligible for bonuses, whether bonuses apply to employees who have left, and whether employees can have custom bonus rules. The right click menu on an employee let you open the employee file and/or employee journal.

 

     

 

Eligibility of Former Employees: If a job is due for a bonus that a former employee was responsible for before he/she left, indicate whether the employee is still eligible for the bonus. Different businesses have different agreements with employees on whether you still must pay. Double click on the bonus percentage to change to not eligible.

Employees with a reduced bonus %: We recommend the default setting of calculate the amount the employee would have gotten, and adjust it in the "Override" column since this shows the employees what they would have gotten at 100% and gives employees an incentive to meet the conditions for getting the full bonus.

Use Custom Bonus Rules for this Employee: Double-click this column to toggle between No and Yes for any employee. If you set an employee to use custom rules, that employee will ONLY get bonuses from rules specific to that employee; general bonus rules will no longer have an effect for that employee.

Highlighting

The Highlighting tab lets you determine what percentages are exceptional, acceptable, need improvement, and unacceptable for departments on time, documents on time, activities on time, customer satisfaction, and calendar event usage:

Change any percentage as desired.  (If you change percentages, the values in adjoining columns will adjust if needed.) This highlighting doesn't change the amount of any bonus or prevent a bonus for unacceptable values; it simply highlights the corresponding values so you can decide whether to override the bonus Chronicle calculated based on the financial figures.

Job Feedback & Satisfaction

The Job Feedback tab lets you indicate which survey(s) (if any) contain customer satisfaction and how negative feedback should affect bonuses:

If you have set up a rated survey to track customer satisfaction score, click One Survey Tracks Satisfaction... and indicate which survey that is. If you have separate satisfaction surveys for each department, click Separate surveys... and select the appropriate survey for each department. (For a survey to be scored, the survey must have Rating questions. These rating questions are added on the Survey tab in the main setup.  Once you've defined the rated questions, the survey is automatically scored whenever someone fills it out. If unrated questions are mixed with rated questions, the unrated questions have no effect on the score.)

Labor % Calculation

The Job Feedback tab lets you indicate whether labor burden should be factored into calculations when seeing if labor rate percentage qualifies for a bonus.

Hourly employees are best evaluated on labor rates since efficiently getting labor completed is the only part of the job they have control over. In evaluating labor rates, Chronicle can calculate labor rates with or without labor burden. Labor burden is the cost to carry your labor force not counting salary or hourly pay paid directly to them. Burden includes the benefits and taxes your company pays on behalf of your employees; it includes costs like:

Calculating labor rates without labor burden is simpler because you don't have to calculate the labor burden for each department; evaluating labor rates including burden may more accurately reflect your true labor costs. Labor burden is typically from 30 to 40% depending on the benefits you offer and how much of those benefits the company pays. (Your accountant would typically tell you what your labor burden is for each department.) You need to periodically reevaluate burden rates because of changes in tax law, health coverage, etc. Labor burden is entered on the Production Department Labor Settings tab within the Labor/Budget tab of the main setup. You would use different labor rates for bonus rules depending on whether you include burden. See the sample labor rates below for suggestions differences.

Overrides to Calculated Amounts

The Overrides to Calculated Amounts tab lets you indicate whether someone calculating bonuses can override the amounts calculated, whether they must give a reason for the override, and what the stock reasons are. This only affects those who have the authority to run the Bonus Calculation report; employees who can just review bonuses after they are calculated can't ever change amounts.

We recommend allowing overrides: one should be able to raise a bonus for exceptional handling of the job and exceptional feedback from the customer; one should be able to lower the bonus if the job file was badly managed or if the employee's action directly caused a customer to be dissatisfied. If needed, add additional reasons for why a bonus might be changed.

 

Calculating Bonuses

 

After all of your bonus rules are set up and other bonus setup is done, do this to calculate bonuses:

1.

Go to the Bonus Calculator tab.

2.

Click Run/Refresh Report.

3.

Review the bonuses calculated and adjust amounts if needed.

4.

Once all amounts are correct, at the bottom of the screen, click Post Bonuses.

 

Ability to run bonus calculations for a single rule or a single department: You can now evaluate bonuses for a single rule or department by selecting the Run for One Rule/Dept button. This can save time if you have many rules or if you only have responsibility for a single department. In addition, for any bonuses you do not wish to post at this time, simply right click the bonus and select Postpone this job/dept until next time then continue with posting. Only those who meet the CommissionReportRunPost security context can see or run this report.

 

 

Customizing What You See on this Report

Different businesses want to see slightly different information when evaluating bonuses. To change the columns on this report, click Customize Appearance. Check columns you want to see; uncheck those you don't want to see.

 

If you want columns in a different position, you can drag columns to new positions: Chronicle will remember the new positions and use them in the future. (If you change which columns are visible or change column positions, those changes only affect you; other users may have a different view.)

Grouping the Proposed Bonuses

Options in the header let you group the proposed bonuses by Employee, Department, Role, or Job. This not only groups the proposed bonuses but it also gives subtotals for each.

Seeing More Information About Any Job

To see more information about any job on the list (for example, to review the file for more detail on whether it was managed and documented properly) you can either double-click the Job or Customer columns, or you can right-click anywhere on the line: the right-click menu has options to open the job file or the job's journal.

Overriding a Bonus Amount

Chronicle proposes a bonus amount based on the financial formula in the rule and the job's financial figures. However you might want to give extra bonus for an exceptionally well-managed jobs or exceptionally good customer feedback on the job. (Customers that are going to rave about the quality of your work or service are likely to be good references; that's worth paying a bit extra for.) On the other hand, if the job wasn't well-managed (for example, if many documents were added late or activities were completed late, or if the job wasn't well-documented in the journal), or if you received negative feedback from the customer, then you would want to lower the bonus.

To adjust the bonus amount, either double-click the Proposed Bonus or Final Amount columns, or right-click anywhere on the line and click Override Calculated Bonus Amount. You'll see a screen like this that lets you override the amount Chronicle calculated:

 

You can adjust the bonus up or down by either a fixed dollar value (for example, you want to pay the employee $25 extra) or by a percentage (for example, you want to pay 10% extra). Or you can indicate that there is No Bonus to set the amount to zero. The Overrides to Calculated Amounts setup tab controls whether a reason is required for the override.

Postponing a Bonus for Later

If there's a job in the list that needs further review or that still has some issues that must be resolved before you're sure if the customer is happy or all labor is entered, or all payments received, you can postpone any job/dept until next time you run the report. To do this, right-click anywhere on the line, and click Postpone this job/dept until next time. We'll remove the job from the list, but it will appear each time you run/refresh the report. If there's a job that Chronicle has calculated a bonus on that you don't want to give a bonus for, then instead follow the instructions for Overriding a Bonus Amount about and edit the amount to zero.

 

 

Reviewing Bonuses

 

Once bonuses have been posted, you can review them on the Review Approved Bonuses tab. If you meet the security level for CommissionReportViewForOthers, then you'll see this for all employees; otherwise you'll only see bonuses for yourself. To undo a posted bonus, you must meet the security level for CommissionReportUndoPost and on the Approved Bonuses report right click on the posted bonus and select “undo post for this item”.  This is also the screen where the person who is responsible for paying the bonuses can mark particular bonuses as Entered into Payroll System so the employee can see whether and when the bonus is to be or has been paid.

 

 

Sample Incentive Program Bonus Percentages

 

These sample percentages are based on a successful bonus program from profitable, real-world, construction and disaster restoration businesses. We’ve compared bonus programs at other successful businesses and seen similar percentages. However, your particular market could be quite different, so base pay, revenue and margins could go up or down based on your particular market. Don't take these values as gospel; they may not be exactly right for your business. Don't announce the program until you have tested it with your business and are satisfied with the results.

Many of the suggested bonuses vary depending on the scope of an employee's duties; pay attention to the description of duties to find the closest match. For all of these bonuses:

 

This section contains sample bonus percentages for:

 

Sample Bonus Percentages for Salaried Employees

Percentage of Gross Profit to Pay Salaried Construction Employees

Role & Base Pay

Gross Profit %

Suggested bonus % of gross profit

Program work

Non-program work

Project Manager: Sells job and writes estimate and manages work

 

Monthly Base Pay: $3,000 – $5,000

50% or more

15%

17%

45–50%

14%

16%

40–45%

13%

14%

35–40%

no bonus

3035%

–2%

–4%

30% or less

–13%

–15%

Sales/Estimator:  Sells job and writes estimate, but hands work off to a construction manager to produce

 

Monthly Base Pay: $3,000 – $5,000

50% or more

7%

9%

45–50%

6%

8%

40–45%

5%

7%

35–40%

no bonus

30–35%

–2%

–4%

30% or less

–5%

–7%

Construction Manager: Produces/manages work after someone else has sold job and written estimate

 

Monthly Base Pay: $5,000 – $10,000

 

50% or more

7%

45–50%

6%

40–45%

5%

35–40%

no bonus

3035%

–2%

30% or less

–5%

Coordinator: Manages program requirements, ensures file documentation; might write estimate

 

Monthly Base Pay: $2,500 – $5,000

50% or more

3%

45–50%

2%

40–45%

1%

35–40%

no bonus

30–35%

–1%

30% or less

–2%

Percentage of Gross Profit to Pay Salaried Water, Fire, Packout, Mold, Trauma, Biohazard Employees

Role & Base Pay

Gross Profit %

Suggested bonus % of gross profit

Program work

Non-program work

Project Manager: Sells job and writes estimate and manages work

 

Monthly Base Pay: $2,500 – $5,000

85% or more

12%

14%

75–85%

11%

13%

65–75%

8%

10%

55–65%

no bonus

55% or less

–8%

–10%

Sales/Estimator:  Sells job and writes estimate, but hands work off to a water/fire/packout/mold manager to produce

 

Monthly Base Pay: $2,500 – $5,000

85% or more

7%

9%

75–85%

6%

8%

65–75%

5%

7%

55–65%

no bonus

55% or less

–5%

–7%

Water/Fire/Packout/Mold Manager: Produces/manages work after someone else has sold job and written estimate

 

Monthly Base Pay: $2,500 – $5,000

85% or more

5%

75–85%

4%

65–75%

3%

55–65%

no bonus

55% or less

–3%

Coordinator: Manages program requirements, ensures file documentation, writes estimate

 

Monthly Base Pay: $2,500 – $5,000

85% or more

4%

75–85%

3%

65–75%

2%

55–65%

no bonus

55% or less

–2%

Sample Bonus Percentages for Sales & Marketing

Sales/marketing bonuses are not tied to gross profit since sales/marketing staff have no affect on whether a job is profitable; these employees are simply rewarded for the work they bring in.

Role & Base Pay

 

Suggested bonus

General Sales & Marketing: Brings in work based on relationships, chasing leads, and/or establishing program

 

Monthly Base Pay: $2,500 – $5,000

lead chasing

4% of collected amount

marketing relationships

3% of collected amount

establishing program

2% of collected amount

Agent Marketing:  Specializes in marketing to insurance agents

 

Monthly Base Pay: $2,500 – $5,000

agent marketing

$25 flat rate

 

Sample Bonus Percentages for Hourly Employees

Hourly employees are best evaluated on labor rates since efficiently getting labor completed is the only part of the job they have control over. In evaluating labor rates, labor can be calculated with or without labor burden.

Labor burden is the cost to a company to carry your labor force aside from salary directly paid to them. Burden is the benefits and taxes that a company must pay or chooses to pay on their payroll. Burden includes costs like:

Labor burden is typically from 30 to 40% depending on the benefits you offer and how much of those benefits the company pays. You need to periodically reevaluate burden rates because of changes in tax law, health coverage, etc. (Your accountant would typically tell you what your labor burden is for each department.)

Calculating labor rates without labor burden is simpler because you don't have to calculate the labor burden for each department; evaluating labor rates including burden may more accurately reflect your true labor costs. Labor burden is entered on the Production Department Labor Settings tab within the Labor/Budget tab of the main setup. You determine whether labor burden is considering in evaluating bonuses on the Labor % Calculation tab within the Setup tab in the Bonus Manager.

How Bonuses are split Up Among Hourly Employees

Once Chronicle calculates a total bonus amount for hourly employees on a job based on a rule, it then divides the amount among the various hourly laborers on a job. Chronicle's bonus manager does this automatically based on the amount each employee earned on the job. For example, suppose two employees worked on a job, in different amounts.  For example, if Sam earned $150 on a job and Will earned $100, Sam would get 3/5 of the hourly bonus and Will would get 2/5.

Percentage of Gross Profit to Pay Hourly Employees

Type of Work

Labor Rate based on paid/collected amount

Suggested % of difference between target and actual to split up among hourly employees*

If burden is NOT included

If burden IS included (modeled on 30% burden)

Water, Fire, Mold, Trauma, Biohazard

10% or less

13% or less

100%

10 – 12.5%

13 – 15.5%

80%

12.5 – 15%

15.5 – 20.5%

60%

15 – 20%

20.5 – 25.5%

no bonus

above 20%

above 25.5%

–60%

Packout

15% or less

19.5% or less

100%

15 – 20%

19.5 – 24.5%

50%

20 – 25%

24.5 – 29.5%

no bonus

above 25%

above 29.5%

–50%

Residential/Commercial Cleaning

20% or less

26% or less

100%

20 – 25%

26 – 31%

50%

25 – 30%

31 –36%

10%

30 – 35%

36 – 41%

–10%

above 35%

41% or less

–50%

* Suggested % of difference between target and actual to split up among hourly employees: Suppose that 15% is the minimum percentage at which a bonus occurs (as with Water with no burden above). Suppose that a job's labor actually comes in at 10%. Calculating a bonus based on the difference would regard the 5% difference between the target of 15% and the actual of 10% as the eligible amount of bonus.