[ironofeden]

Hi All
I would like to get your feedback on this subject. Sorry for the long explanation

Started a small shop 3 years ago, Brought 3 machines from a company going bust, took on the main guy running the setup. We both worked part time around 25 hrs for him and 10 for me as i was still employed full time. He was on £15/hr
Last year offered him contract at £16.00/hr for 28 hrs and 33% profit plus two weeks paid holiday for extra 4hrs/week. Reason for this twofold, one to help get more output for less cash out per week (cashflow) two, to make things better for him, he had moaned about only ever getting paid his hourly rate.
This year we have just brought a new cnc lathe and i wanted to readjust his contract. The new contract is 33% profit 4 weeks paid leave, £16.00/hr for 25hrs and he does an extra 8 hrs/week for the profit. Each machine is earning £18k per annum. His profit last year was £4700 on top of £23400 salary.

What do you guys think to this, i'm unsure if i am being harsh on him or ripping myself off. Bearing in mind this guy has 30 years experience and i only have 5 on cnc work??

cheers

benjamin

[txcncman]

You have to work within the limits of your business model. I do not know the pay scale in the UK. In the US he could expect to make $20-$25 per hour.

[harryn]

What will you do when you buy machine number 10 and have 3 employees ? Your profit sharing is a good idea and motivating, but perhaps consider to look more than 1 year into the future for the new contract plan.

If you structure it in a way that the profit ( I assume after all costs are considered ) is "pooled", and then split between employees, then it will motivate him to help you decide when it is time to bring in additional people, and he will benefit from helping to train them.

Since it is just the two of you, he might enjoy being part of the discussion about how you want to keep growing and use the profit pool to help everyone make more money.

[dsnellen]

I agree with Harryn. An active profit sharing plan is a good way to retain experienced workers. You will want to structure the plan in a way that the payout is fair and predictable. For example, say you decide to set aside 30%+/- of net profit to a profit sharing plan. Your main guy would then receive a percentage of this set aside and you a percentage. He must understand that new employees will also share in the plan beginning with their second year of employment. By hiring a new guy, the implication is that business is more than the two of you can handle. Many ways to structure a profit sharing plan. I am assuming you are not providing any form of "retirement plan" for him. Often profit sharing monies go into a tax deferred retirement plan that the employee receives when he/she eventually leaves the company.

[gopal6601]

You have to work within the limits of your business model. I do not know the pay scale in the UK. In the US he could expect to make $20-$25 per hour.

I am also agree with you.

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