I’m paying my brother $25 an hour to work side by side with me this year. It typically works out to about 200 a day. Is that fair pay, or am I overpaying? For instance, we did work the other day worth 1,300, we worked from about 10:00 (late start due to weather) til 10:00. He made $300, I made 1k. Does that seem correct to you? I do worry about overpaying and not being able to keep up with the taxes, although I have an accountant that should be able to help advise me. Curious what the ratios are for you guys. He’s my brother so I don’t mind overpaying, but do you guys typically pay hourly or commission based?
it gets muddy when you as the owner are combining into the equation
ideally, or at least as a generally accepted benchmark, wages should be no more that 30% or revenue
so as a guideline to know where you’re at, you’ll need to know what you can do in a day (half day, hour, week or something) and then arrive at how much he is adding to your day total, then take what you are seeing he is adding and then multiply by .3 to get his daily (or whatever unit you used, hour, week, month) wage cap based on generally accepted guidelines
sometimes with 2 people you may find what a helper adds is signifigantly less than double what 1 man can do which means you might only be making a little more after paying him. but you have someone to work with etc But if youre newer to this, many of us have talked about how it takes 3 people to double what 1 person can do (depending on typical job sizes and invoice amounts during the day) if the 2 of you can do 3 jobs at 500 each (more efficient) thats different than 7 jobs at 200 (way less efficient)
hope this helps
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That does help, yes! Thank you.
that’s total wages, his brother is not working alone he is helping
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so your brother is worth 300 to help. if you are working too how much are you worth i assume at least as much as your brother so 300
that puts wages at 600 plus workers competc so add about 12% 600x12%=672
so your wage cost is 52% of your gross.
if heis your partner and sharing the input for sales admin etc thats a diffrent thing
the fact your ratio is high doesn’t mean he is making too much it could also be your prices are too low or you are both too slow.
if you pay him less would he stay? could you find someone as good for less?
there is no one answer
So you’re saying that he and I combined should be taking home 30% of income, and so if he is half as fast as me, roughly speaking I should be getting 20% and he would get 10%?
So for instance, in a day we do 1,000, my take home would be 200 dollars, and his would be $100? All things considered, the way I have things priced that would take us about 8 hrs or so. So for me that would be $25 an hour, and for him around 12.5 per hour.
Working alone I typically take home 60% and put away around 40% for taxes and equipment, etc, and in that case I’d be able to do $800 of work in 8 hrs, and I’d be making around 60 an hr. This is my first attempt at paying someone. He’s willing to be paid less, he understands that I’ve never done this and don’t quite know how to figure it. I’ve wanted to go to a commission based pay instead of hourly, but am not certain how much I should be paying him and myself. He has thought I’m maybe overpaying him anyway and knew I’d be adjusting things.
Any help is appreciated.
Like everyone has said , it’s a little tuff when the owner is also out cleaning windows . Let me try and put it this way , let’s say you send you brother to do a job by him self ( solo ) and you go to hang out at the beach . The job total is $600 , you would pay him tops for 30% which would be $180 .
Now let’s say you get your brother a helper and the job totals equal 1,200 in one day , they would ideally slip $360. Again the 30 % is an ideal number , many companies go over .
Personally I’m a big believer in paying a lower hourly wage and more on the bonus side . If you see him kick butt one day /week , throw in there an extra $100or 2
Also are you in Canada ? Because there’s a big difference in the dollar
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I’m in US. I see the issues, you all have been very helpful in figuring this out!
How you get to 30% is up to you, but keeping total employee wages below 30% is the key. This includes when you are an employee. We do commission and it has its pros and cons like everything. If I work the truck I treat myself as an employee for the day and we split it evenly.
You want your COGS(cost of goods sold) to be less than 40%. This includes gas, chemicals, equipment rentals, small tools, subs and technician payroll.
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That’s 20 man hours . @ $65 an hour. Not good if you ask me Without getting into percentages I have Got to agree with @DelirousDungo it’s either your prices are to low or your working to slow.
So if it’s because your brother is new and he isn’t pulling his weight yet , then yes your over paying him. Sorry. Don’t let him read this He’s going to be mad at me. But hey he’s your brother sucki it up. I’m sure he’ll get better.
Correction that’s 24 man hours 
that hourly wage just went down . “Houston “ we have a problem
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so your going to pay out the whole 30% to employees and take all the deductions from your company.
i pay 12% if 2 staff and 20% if solo. i sent a college student out for her second day and she did $744 in 7 hours solo so 20 per hour.
small business is tricky, i was just giving you some ideas of how to think of things. when we are owner operators we often forget that we are still trying to be a “business”. if you are the owner and you buy the equipment, manage the advertising, sales , book keeping and pay for everything AND you go do the cleaning you should certainly be earning more than a helper.
but your earnings are made of several pieces and the portion you assign yourself for actual cleaning should be representative of what you would some one to replace you. you also something for the admin you do and the “business” should have some profit.
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I told him I’d be putting him on commission rather than hours, that when we’re working together he’d get 15% of job total. Are my prices too low if I’m making 100$ an hour gross when I’m working solo? That doesn’t always account for in-between jobs, but on my own I consistently make $800 a day if I’m working 8-10 hrs for the day, sometimes more, sometimes less.
But either way, he came in about 15$ an hour yesterday at 15%, he cut about 25% off my time.
Is what you all are saying is that the money you’d earn for owning the business is above what anybody including you should make as far as cleaning wages, so when you work you make the extra of an employee but also are making money from the profit of the business?
I told him upfront I’d be adjusting things and that I’d always be up front with him about it, he’s happy to make $100 a day if that’s what I feel he’s worth, he trusts me to pay him fairly, I hope to both pay him fairly (and generously, he’s heading off to college and I know he needs the money), and also be learning how to pay an employee if I hire someone who isn’t family.
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yes
operations ideally is around 50% of the revenue
the other 50% goes toward admin/finance, marketing/advertising and hopefully 10% to the owner as profit from owning the business which can be reinvested in the biz
if you are doing all those jobs above, you are receiving a portion of the non operations 50% for each of those responsibilities that would be paid to someone else if you weren’t going to do it
many times this is why ones working to operate a “real” business hear from customers they are double what “the other guy quoted”. the other guy is merely looking at wages/operations reimbursement, leaving out considering the rest of what needs to be taken care of to even provide the service in the first place
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Are taxes and such for income tax, employment tax, etc included in the 50% of operations, or is that supposed to be apart of the other 50%?
employee payroll burden would be part of the operations 50%
as a s corp you would receive a paycheck for however much or not of what you are market value paying yourself, you would have w-2 withholdings on that paycheck amount so it’s included in the portion of the 50% that was paid to you personally
the profits from the business would be taxed at a different lower rate as they flow thru the s corp and to you personally as distributions
I tried to simplify the principles, ask your tax guy about it, but you definitely do NOT want to be running as a Sole Proprietor for tax purposes as your income and business grows
I was told that being an s-corp had no real benefit, so I just payed to be made a single member LLC. I’ll have to ask more questions…
