I bought my first SMB at age 25 with zero management experience. One of my toughest challenges? Employee compensation structures. So I spent over 1,000 hours researching them. Now, I use the same one for all of our employees:

First, why bonuses? Flat salaries foster mediocrity, straight up. You'll never get the most out of any employee without bonuses. Every employee needs a level of variable compensation tied to their performance, even the most entry-level positions. Now let's dive in:

1) Base + 25% Our employee's base salaries are typically less than market. But with a 25% bonus, they get about 15% over. My hiring motto: hire fewer, pay more. I'd rather have 5 highly motivated, highly compensated employees than 10 unmotivated, poorly compensated ones.

2) Quarterly vs Annually Annual bonuses hold employees hostage. Our 25% bonuses are paid quarterly to ensure motivation throughout the year. It also reduces churn during our busiest time of the year, Q1, when many employees traditionally get their annual bonus and quit.

3a) Employee Created This is our secret sauce. Most companies force bonus goals on their employees. But we empower ours to set their own. Every quarter we set 5 company-wide goals. Then employees create their own 5 goals tied to the company's.

3b) Employee Created Cont. Once finalized, we house our employee goals where the entire team can see. Combined, this creates 2 major dynamics crucial for company growth: - Creates a level of friendly competition - Gives employees a sense of ownership in the biz

4) Reward Effort Sometimes shit just happens. Especially in 2023. So if an employee falls short of a goal, ensure no uncontrollable factors are to blame. When in doubt, always reward effort.

TL;DR 1) Below market base, above market total 2) Quarterly > annually 3) Let employees set their own goals 4) Always reward effort Do me two quick favors: - Follow me @Chandler Reed - RT the tweet below to help an SMB Owner better structure their employee compensation:

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