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Power Teams: Handling Team Member Compensation

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RISMEDIA, June 16, 2008-Determining a fair and equitable compensation package for team members that is designed to retain your best talent without busting your budget can be quite a challenge. For some team members, an hourly wage may be appropriate. Others really should be paid a salary, and your salespeople should be earning commissions.

In Chapter 6 of RISMedia’s recently released book, “Power Teams: The Complete Guide to Building and Managing a Winning Real Estate Agent Team,” by RISMedia President and CEO John Featherston and top producing Broker Ralph R. Roberts, we help you sort out the complexities of compensating team members and share insights from some of the top agent team leaders in the country.

Following is an excerpt from Chapter 6:

Outlining Your Compensation Package

The area that tends to cause the most disagreements in any business is compensation. Whichever form(s) of compensation you offer, you need to make sure that all your team members are well aware of how you’ll compensate them for their efforts and productivity.

One of the first discussions you should have with all your team members, whether they work in-house or as an independent contractor or on a work-for-hire contract, is how and when you’ll pay them. Your discussion should cover the following:

• Payment amount: This can be a flat dollar amount per hour, per year, or per project (for independent contractors); it can be a percentage if you are paying the person on commission, or it can be a percentage of the team’s net revenue if you are dividing proceeds among partners. When you are first starting to build your team, we encourage you to keep your compensation package somewhat conservative. Ramping up compensation later is always easier than trying to scale back. Team members usually frown on reduced commissions and salaries.

• Payment schedule: Specify the date on which the person can expect to receive payment. For hourly employees, this may be the 2nd and 4th Friday of every month. For independent contractors, you may specify that they will be paid within so many days of your receipt of the invoice.

• Invoices/reports: If you require independent contractors to submit invoices for payment, let the contractor know up front the type of information you need in the invoice. If you have agents working for you on commission, you may require that they submit sales reports prior to receiving their commission payments.

Review your payment plan with every member of the team, encouraging the person to ask questions, so you can clear up any potential misunderstandings. Your goal is to establish clear expectations in the minds of all team members, so they do not become confused, disappointed, and disgruntled later by payment amounts or schedules that fall short of what they expect.

Tip: Craft payment plans that are clear and simple. An employee shouldn’t have to wade through a convoluted compensation agreement to figure out how and when they can expect to get paid. This would only create an opportunity for misunderstandings. Some compensation schemes are going to be complex, but complex doesn’t mean unintelligible.

Remember: When you’re trying to develop a compensation package, put yourself in the team member’s shoes and ask yourself, “Would I invest the time and energy and take on the responsibilities that this job requires for the compensation I’m offering?” If the answer is “No,” then you need to review your compensation package.

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