Are Salaries Fair

I think paying by salary, rather than by wages, is nothing more than a convenience. 

What’s more, I think it is unfair - to somebody. 
​

As I understand salaries, this is the ‘salary bargain’. “I pay you $xxx per year for your professional services. Because you are a creative professional, you don’t have to punch a time clock. Your contribution is valued differently than by mere presence.”

In an architectural firm, I don’t think the ‘salary bargain’ applies to anyone. 

In theory it could. The reality is usually quite the opposite. 

Why? 
Architecture is really complicated. That complexity makes it very difficult to develop standard processes. Without standard processes you can’t accurately predict your costs. So the financial model of most firms is based on labor.  

Design Labor + Overhead + Profit = Fee Revenue

What multiple of the amount paid for the design labor that is spent will equal ALL of our costs and a profit?

[An example calculation]
​
If you study the example, it becomes obvious that time and its cost is central to the financial model of most architectural firms. 

You have a salary for convenience in preparing payroll checks. You have a timesheet to track time. Your salary and your timesheet have nothing in common. 

I think they should have something in common. That’s where Comp Time comes into play. Comp Time prevents the firm from benefiting from your extra work at your expense. Your extra hours create more billable revenue. If you aren’t paid for those hours, the firm is the only beneficiary. 

The opposite scenario where you work less time tends to be self-correcting. Unless you are phenomenally effective, poor results will show up pretty quickly and corrective action is taken eventually. 

As adults, we worked under the assumption that our designers would be diligent about meeting productivity targets if the productive work was available to be done. Having the work available is a management problem to solve. 

[[Trello-PM, which I developed AFTER I retired, can help with finding productive work
when it feels like all that is available is 'busy work’.]]

Sometimes circumstances conspire to provide more work than can be accomplished in a normal 40 hour work week. Sometimes this can last for months. The only way to solve this problem is by working more hours. In order that management wasn't the only one to benefit from this extra effort, we used Comp Time. 

The extra hours were 'banked' for later use as additional paid time off or to be paid in cash at year end. 

We looked upon Comp Time as a way of being fair. There are simply too many variables in the extra work situation to say it will all wash out evenly in the end. For instance not everyone is likely to contribute the same amount of extra work, or perhaps not everyone is needed, or skill level might enter into the 'who will work' decision. 

So far this is all straightforward. Sure, you have to develop rules and procedures, but it is fairly simple. 

You just track these extra hours in a spreadsheet. The spreadsheet process is simple. You make an entry each time Comp Time is added or subtracted. You can keep everyone in one spreadsheet if you are comfortable with filtering, or just copy your template and have one spreadsheet per person. The columns would look like this:

     |  PERSON  |  DATE  |  HOURS (+/-)  |  ACTION  |  VALUE  |

‘ACTION’ gives you a place to describe the entry: 

• hours banked
• hours taken in time off
• hours taken in compensation

The ‘VALUE’ column let’s you see what the ‘liability’ is for the accumulated Comp Time.


Hopefully you find something useful in our process.