Employee Contracts

Employee Contracts

Employee Contracts

Whether you are opening a brokerage, expanding a team, or taking on a managing broker role, chances are you’ve encountered the challenge of employees not meeting expectations. Effective staff management hinges on designing a compensation and reward system that motivates individuals to perform as required. In this chapter, we delve into crafting a system that aligns employee behavior with organizational goals. We’ll explore both the written employment contract and the often-overlooked psychological contract, shedding light on common pitfalls in staff management processes.

The Written Contract - Employee Compensation Structures
You need to design compensation structures to motivate your staff to do the jobs you hired them to do. This involves matching the desired behaviour to the compensation received. Imagine you own a facility, and you’d like it fully utilized while keeping costs low. If you compensate a person based on cost savings alone, you are at risk of motivating them to create policies that keep the place underutilized. This is because empty spaces can be cheaper to run than full ones, as they don’t require power or cleaning. In this case, you have the option of creating a bonus structure based on both cost savings and space utilization. You can ask the staff to create financial projections based on step-based variable costing tied to utilization. For example, if the space is used for 4 hours a day by 4 or fewer people, then the cost should be $1, but if the space is used for 8 hours per day by 8 people, then the cost should be $2. This links utilization with costs, but you may also consider applying a portion of the bonus consideration to utilization itself. You can task this person with the responsibility of supporting programs that increase utilization, and you can tie a reward to this.

Hiring a Managing Broker
If you are hiring somebody whose license is required to keep the doors open, like a managing broker, then you may consider a term contract that includes a penalty for leaving outside the contract. Specify terms such as required notice and penalties for failure to deliver notice. Another option with this role to offer a base salary plus compensation for every agent managed. This motivates the managing broker to retain as many agents as possible. It also allows you to step base your employment costs so you aren’t paying overly high fees when the brokerage has few agents. Some brokerages go with a set fee per agent and others pay a percentage of the gross commission income. If the brokerage is large enough then the duties may be divided between recruitment and document review. In this case you can offer a fee per document reviewed, or a bonus if the broker processes documents above a specified threshold. If there is a broker designated towards recruitment then you can offer a fee to be paid for recruiting the agent and a cut of the gross commission income.

If a managing broker is impossible to find in your marketplace then consider adding signing bonus that is required to be repaid if the employee leaves within a specified time period. This is particularly important if the job requires substantial training or involves sharing trade secrets. Once you train an employee in those trade secrets, they become more in demand within the marketplace. If better offers are waiting, those employees may be unwilling to stay and work out problems. Creating an ironclad contract forces conversations that might not have happened otherwise and prevents you from becoming an unwitting training centre for the surrounding brokerages.

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