CHAPTER 18-: This is the eighteenth chapter of “The Complete Guide to Starting a Cleaning Business.” Your cleaning company will be a service based business that will employ several individuals with various job descriptions. One of the primary definitions of an employer is one who compensates people for their services, usually through monetary rewards.
In simple words, one your main jobs as the head of the company or the owner of your own business is paying people salaries and wages at the end of the a time period. The very best employers are the ones who understand the importance of a well organized and fair pay structure. As a matter of fact, in a service based business like the cleaning company which you are about to open the doors to, the pay structure can serve as the backbone of the business. The techniques and policies you adapt when it comes to reimbursing or paying your employees will be a clear indication of how well you are performing as an employer.
Why You Must Plan your Cleaning Company Pay Structure Carefully
One of the major reasons why getting the pay structure for your cleaning business absolutely spot on is so imperative is because of how complex the ordeal can turn out to be. Forming a pay structure isn’t exactly elementary school economics. You need to put a lot of thought into the estimations that you are making. The hardest part of coming up with a concrete pay structure is finding the ability to take into account variables and then adapt your pay structure on the behaviour of those variables.
Forming a Pay Structure is Not Easy
From the perspective of the most inexperienced entrepreneur, building a pay structure is perhaps as simple as diving the total revenue earned by the number of workers employed. If the task of forming a pay structure was as easy and uncomplicated as that, then perhaps the best entrepreneurs in the world would not be spending hours in their office trying to figure out how to reimburse each and every single individual.
The key word when it comes to forming a pay structure is “individual”. The payment made to an individual should be based on his or her own merit. A cleaning company like the one that you are about to establish, will work like a physical human body. The human body comprises of various vital organs, and some not so important organs such as the gall bladder. That being said, each and every single organ in the body has a particular role to play. In order for the organs to function to the best of their ability, they need to be supplied with a steady stream of nutrients that are carried in the blood.
Consider Cleaning Job Difficulty
Most people, like inexperienced entrepreneurs, have the assumption that the blood which is pumped out by the heart is distributed uniformly across the body to all the organs. This is not true. Certain organs in the body have a greater need for the blood, or rather the nutrients in the blood, than other organs in the body. These are the organs which consume the most nutrients since they dissipate, store or utilize the most amount of energy. For example, vital organs such as the brain, the liver and the lungs in your body will be in greater need of the nutrients in the blood than the lesser important glands in the body such as the gall bladder mentioned above.
This imbalance in the distribution of blood and nutrients helps maintain the harmony of the physical human body. Much like the human body, your cleaning company too needs an unbalanced distribution of the generated revenue to stay afloat and stay balanced. Not every person working for you or under your payroll can be paid the same amount of money. There needs to be impartial distribution of the income in order to reward individuals according to their merit. Just because the distribution of the money is impartial, does not mean that it is unfair. This is because the monthly earning of an individual employee will be based on his or her job description.
Evaluating Job Description in Monetary Terms
Assessing or evaluating the job description in monetary terms is perhaps the steepest challenge for an employer. You need to put a price on each and every single task in your cleaning service company, starting with the simple job of mopping the floor to the more complex job of hunting profitable clients. In the context of a cleaning business, or any other service based business for that matter, the amount of work done should be equivalent to the amount of income earned.
Problems to Expect When Forming a Pay Structure
Herein lies the problem for most novice entrepreneurs, as they are often mis-translate amount of work into the physical effort exerted by the employees. In any service based companies, there will be a lot of individuals who will be struggling and toiling day and night to earn their wages. In terms of physical effort invested, your janitor is perhaps the hardest working employee in your cleaning service company.
Does that mean your janitor is entitled to be the highest earning worker in the company? Not quite. Even though you are strongly advised to compensate physical labour as generously as you can for the sake of the welfare of your own company, you must bear in mind the all important thumb rule of entrepreneurship, and that is to pay the individual in accordance to the amount of money he or she draws for the company.
The money made by an employee for the company is an indication of how indispensable he or she is and vice versa. For example, the maid employed by your cleaning service company can be quite easily replaced if she takes a sick leave or resigns.
However, it will be very difficult for you to find a marketer to replace the one who is on a leave or has resigned. This has a lot to do with the qualifications of the employee, the importance of the skill that they bring to the table and the market saturation for their profession. There will be an unlimited supply of maids and janitors, but you will find it extremely difficult to get your hands on a well qualified and reputed general manager who can supervise all your operations. All of these and more have to be taken into consideration when forming a pay structure.
5 Steps to Establishing a Pay Structure for your Cleaning Staff
One of the smartest and easiest ways of setting up a pay structure is by preparing a payroll budget. The importance of a budget has already been outlined, and by now you should be well aware of the kind of advantages that you can derive with a solid, well planned and fail proof budget at your disposal. Budgeting should not only be restricted to cutting corners. It can be of great use when trying to allocate a limited number of resources, mainly monetary resources for the employees of your cleaning service company.
1. Let your Cleaning Company Senior Managers Handle the Process
The task of creating a payroll budget must be handed over to your senior managers, as there will be plenty of other assignments that you need to be concerned with as the owner of the business. With that being said, you must keep a watchful eye on the work of your senior managers and ensure that they are doing everything within their capacity to come up with a payroll budget that will benefit all the employees of the company, and not just the high ranking workers such as themselves. Make sure that you keep the budget for merit increases separated from the overall budget. This is because the former will be more affected by changes in the market than the latter.
2. Be as Flexible as Possible
As mentioned before, trying to set up a pay structure is all about your ability to work with variables, and in this case, you need to make little adjustments to your payroll budget in accordance to the variations in the market. In the case that you have a high turnover, you will be required to move the salaries more quickly. When turnover is low, you will have more time in your hands to implement the pay structure.
3. Benchmark all Cleaning Jobs/ Tasks
Once you have put an appropriate price on the job and have decided on the amount of money that you are going to allocate for each task in your cleaning service company, it is time for you to benchmark the jobs. It is okay if you are unable to benchmark all the jobs, since a service based company like yours will have numerous employee positions, but you should be able to cover most of the jobs. Most inexperienced entrepreneurs are not familiar with the term benchmarking.
In simple words, it refers to matching an internal job to an external job that is of a similar nature or of a similar stature. Benchmarking of a job should not be based on the job title. Instead, it should be dependent on the content of the job or rather the job description as it is more commonly known. For example, a bookkeeper and an accountant may seem to have the same job on the merit of their job title, but once you get to know about their job descriptions, you will realize that there is a massive difference between the two professions, and hence they cannot be matched according to the principles of benchmarking.
The motto of benchmarking that you ought to follow is, “price spaces, not faces”. This means that you are supposed to take into account the market value of the job, rather than the person who is occupying the job. There are plenty of agencies that offer detailed information about the market value of jobs in organizations of similar size, industry and location. You may want to refer to these agencies when benchmarking.
4. Create a Salary Range Based on Pay grade
The next step in forming a fair and well organized pay structure is using internal equity method to create salary ranges based on pay grade. For this, you need to determine how many grades are needed in your cleaning service company. The number of grades you end up with will depend on the number of employees who are working in your company and the variety of the jobs that you have on offer at your organization. If you open a cleaning service company that specializes in one particular aspect of cleaning, such as carpet cleaning, then there should not be a lot of variety for you to deal with.
However, if your cleaning company provides complete cleaning solutions from the onset, then there are a lot of variables that you need to think about. Once you have decided upon a reasonable number of pay grades, you need give each grade a spread or a range. This allows the employees within a pay grade to progress financially or in other words earn more as they climb up the rank or get promoted. If there is no pay grade spread, then you cannot promote your employees, and your employees will eventually resign due to a lack of financial progress. The standard midpoint progression from one grade to the next should be 15%. This is to make sure that with each promotion, your employees will be rewarded with a meaningful pay rise.
5. Communicate the Salary Scale to your Employees
Once a pay structure is in place, the final step is to communicate the numbers to your employees and potential employees. You must be blunt and plain about the salary figures of your workers. Do not keep them in the dark about the amount of money that they will be earning. Not only is it an unethical practice to hide information about pay structures to the employees, but it is also a morale breaker which may compel them to leave your company and join your rivals who have better practices to boast about.
When you are hiring employees, you should have a crystal clear idea about the amount of payment that is within your range of affordability. This helps you to come out as the winner during negotiations with employees. The salary range must be disclosed up front as it is a very important practice is trying to recruit and retain the best workers in your company. Whenever you are communicating the salary numbers to your employees, make sure that your numbers are justified with market data analysis. Your job is to give them a genuine reason to believe that the amount of money that you are paying them is worth the effort that they will be investing for your cleaning service company.
The key in forming a pay structure is to not be too stingy or generous with your payments. Reward each worker and his or her work on the basis of their performance as well as their potential. With a well structured payment process in place, your employees will be content to work diligently and industriously for you.