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Labor is the biggest and most significant expense in any utility field service project, sometimes accounting for up to 70% of the total project budget. Labor costs play a pivotal role in determining a project's profitability, and if not managed effectively, they can significantly reduce or even eliminate profits.
Traditionally, in the utility industry, field workers are typically paid by the hour. However, this hourly pay system can kill motivation and efficiency, especially for smart meter deployment projects. Some technicians may prioritize personal needs over project needs, leading to delays rather than timely completion.
One of our clients discovered that field workers were spending hours at McDonald's before installing their first meter of the day. This was revealed by the Fieldman field service app, which tracks GPS locations. A supervisor reviewed the workers' movement reports and grew suspicious when he noticed that several crew members had been located at the same place for an extended period. Google Maps confirmed that this location was a McDonald's.
Piecework pay and hourly pay are both effective strategies. The difference is that they are effective in different field service jobs.
This guide will break down their differences and help you decide which suits your task best.
Hourly pay is a method of compensation in which employees are paid a fixed amount of money for each hour they work. This is the most common type of pay system in the United States. Hourly pay is simple to administer and easy for employees to understand. It is also relatively fair, as it ensures that all workers are paid the same amount for the same amount of work.
This method is often used for jobs that are difficult to measure in terms of output, such as maintenance work like cleaning and servicing transformers and circuit breakers, maintaining water tanks, or repairing streetlights and traffic signals. It can also be used for jobs that are performed on an irregular basis, such as proactive asset management.
Pros:
Cons:
Hourly pay is an excellent choice for utility maintenance jobs, as it aligns well with the nature of the field service work. Utility maintenance crews or single technicians often perform a variety of tasks, ranging from routine asset maintenance to emergency repairs. For routine maintenance tasks, hourly pay ensures that workers are compensated fairly for their time and effort. This is particularly important for tasks that may not be as easily quantifiable, such as inspecting equipment or performing preventive maintenance.
In the event of an emergency, hourly pay also provides flexibility for utility crews to work long hours as needed. This is crucial for restoring service to customers and minimizing disruptions. For instance, if a fallen tree damages power lines, crews may need to work late into the night to repair the damage and restore power. Hourly pay ensures that they are compensated fairly for their extra time and effort.
Overall, hourly pay is a well-suited pay structure for utility maintenance jobs, as it accommodates the diverse nature of the work and provides fair compensation for both routine maintenance tasks and emergency repairs.
Work and asset management software and field service apps enable the tracking of hours worked by individual technicians on various tasks, allowing supervisors or the accounting department to generate the necessary reports for issuing paychecks.
Piecework pay, also known as task-based or output-based pay, is a method of rewarding workers for the amount of fieldwork they complete. Instead of paying workers by the hour, piecework pay pays them a fixed amount for each task or unit they produce.
For example, if a worker's job is to install a new meter, they would be paid a certain amount per installation. This type of pay system is often used in enterprises where tasks are easy to measure and track.
Pros of Piecework
Cons of Piecework
Fieldman's data indicates that piecework pay is an excellent choice for utility contractors undertaking AMI deployment projects, as most bids for smart meter implementations mandate piecework pricing. This approach effectively mitigates the risk of overspending on labor by converting it into a fixed cost.
When field service workers know that they can earn more money by making more installations, they are more likely to work harder and faster. This can lead to increased output and reduced labor costs for the utility contractor. Piecework pay can also help to retain high-performing technicians. Field workers who are skilled and efficient can earn more money under a piecework pay system, which can make them more likely to stay with the company.
One of our clients in Colorado implemented piecework pay for its AMI deployment project and experienced a significant jump in productivity. The vendor had started a project to install 20,000 water meters in 7 months and used Fieldman as its work management software.
After two months into the project, the worker's performance report showed that average productivity was below planned by 17 %. Fieldman's platform detected a technician who was not moving for half a day. When a supervisor investigated, they found the technician sleeping in his car.
The vendor faced a risk of liquidated damages if the project was not completed on time.
Instead of hiring an additional workforce, the project manager decided to change from hourly pay to a piecework pay method, hoping that it would motivate his workers and increase efficiency. In two weeks, the Fieldman dashboard clearly showed that installations increased by 28 %.
Field service management or work management platforms track the number of completed jobs for each technician, allowing supervisors to create reports instantly.
Both hourly and piecework pay methods are great for small contractors or simple projects and really depend on the work type. But what about complex projects or scenarios when different types of jobs are utilized at the same time? What if workers need training before starting a project?
A hybrid model is the best and most efficient approach. For an AMI deployment project, a worker is hired and paid minimum wage to undergo training for one to two weeks. After completing training, the worker is incentivized with additional pay per installation.
In some mass-meter deployment projects, the entire work area is divided into zones, and work in Zone 2 can only commence after Zone 1 is complete. One team of technicians is paid for completed tasks, with their objective being to install as many meters as possible. The second team of field service workers is responsible for cleaning up Zone 1 and finalizing jobs within the territory. As a result, their key performance indicators (KPIs) differ, with the primary metric being job completion. This type of work should be compensated on an hourly basis.
Modern field service management platforms like Fieldman can track and record different types of jobs, even if they are performed by the same technicians. The field service app collects the number of hours spent on different tasks, creating detailed work performance reports.
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