Updated: Jan 31, 2021
It helps to do research on most decisions but deciding how much to compensate your employees should be pretty high up there. Many factors like location and staying locally competitive should affect your decision. Here's a little bit of information for common and not so common compensation plans.
First off: location
The cost of living in certain regions varies pretty dramatically. For example, the cost of living in Manhattan is much higher than living in New Jersey. The corollary is that people who live and work in certain regions won't work unless they get paid enough to live there. If your company is in upstate New York where land is cheap, people are often willing to work for less. To find out what the local market rate for a solar installer is in your region, do a search for solar installers on a job search site like Indeed.com or Glassdoor.com. My search in the DC area showed anywhere from $15-$50/hr depending on experience and certifications.
Offering what your competitors offer is a good way to reduce loss of people to your competitors. It also supports charging clients the local market rate for solar.
But how do you get experienced people to work for you instead of them? This is where an understanding of other benefits and alternative compensation plans can be useful.
The basic, most common method is the hourly rate as mentioned above. It's simple, predictable, and easy for everyone to understand. Some companies pay more for high-pitched roof jobs due to the danger and difficulty. However, it also doesn't incentivize your installers to work any faster and you have to pay them when there's no work or lay them off.
Another fairly common method is the piecerate structure. Piecerate work is where employees get paid by the amount of something they do. Electricians sometimes get paid by the socket or light-fixture installed. Installers are sometimes paid by the panel or kW installed. Installers argue about whether panel or kW rates are better. It takes the same amount of time to install a 320W panel as it does to install a 370W panel. It takes way more effort to install mods on a high pitched roof though. Be sure to incentivize your whole team to want projects like that. If it's harder, pay them more for it so they don't call out sick on those jobs.
Piecerate work is often easier to put in place on large jobs. It incentivizes teams to work faster, teams become very productive, and it's possible to earn a lot of money. On the other hand, some contractors call this type of compensation "piece of a paycheck." If some situation arises and delays work, you don't have to pay them. It protects you as a business owner but also risks losing experienced workers to more reliable income. It is more complicated accounting, requires more oversight, and may sacrifice quality for speed.
Hourly + bonus
An in between method to these two is the hourly + bonus method. This is where employees are paid an hourly rate plus some other piecerate-type of stipend like panel-pay (pay per panel installed). This method incentivizes workers to work quickly and keeps them fed during slower periods. There's higher earning potential for everyone since jobs get installed faster; however, it needs more oversight due to quality concerns and more complex accounting. Sometimes, incentives can cause unintended behaviors that hurt other parts of your company.
If you are just starting or are more of a salesperson, you may need to use subcontractors to get the jobs done. Subs are usually paid in lump sums where you give them a big chunk of money. It's fairly simple accounting as long as a strong contract is in place. The legal aspects are very important to get right so the subs don't lowball you to get the bid and then come back to exploit the holes in your contract (very common).
Salaries are tempting because the math is easy and the employees become exempt from much of the Fair Labor Standards Act (FLSA) meaning they have few legal rights and don't get paid overtime. The FLSA does protect non-exempt workers and requires they be paid time and a half for overtime. Installers fall into the non-exempt category though so salaries would be illegal for them. Since installers' duties are not considered executive, administrative, or professional, they are non-exempt.
Prevailing wage work is usually contractually mandated and is important to pay attention to. Your bid prices go way up and employees LOVE this kind of work.
Union affiliation is where you hire labor from the International Brotherhood of Electrical Workers (IBEW). They have a solar division.
Another thing that is done by larger corporations is to offer slightly lower salaries but with other perks like education, stock options, employee rates for your products, or something that creates value for both you and your employees.
Now that you know the most common options, you have to make a choice and implement them. You can change your decision if it doesn't work the way you want. Just be aware that it will cost something to change the plan. You will want to figure out which of these works into your business plan and what your goals are. Try to think 5 years ahead. Make sure they are legal and won't cause problems in other areas of the business.
If there are any other methods you are able to share, please email me at email@example.com.