Employee Incentive Program

I have been tasked with re-developing our employee incentive program.

1. Current Lease & Renewal Commission  is based on “effective rate x lease term x factor = commission.” Renewal Commission is split between all onsite employees.
a. Our investors have requested the incentive is driven more to the bottom line. I.e., paying New Leases based off Net Move-Ins for the month, etc.
2. Current Year End Bonus plan is based on Net Income. The employees are eligible for up to 5% of their annual salary.
a. Our investors want to implement a plan on a quarterly basis in order to positively impact this throughout the year.
3. Current Competition Quarterly Plan  This is geared to Rental Collections, Net Leases and Renewals. The property that has the biggest improvement for the entire quarter is the winner. The rewards vary from1/2 day off, gift certificate to spa, bowling, dinner for two or up to $50 bonus.
a. Our investors want to keep this plan, but want to gear it back towards to the bottom line.

We completed research through reaching out to our District Managers for their prior incentive plans, local apartment association and SHRM.

We presented to our investors an option to our investors that not only give an extra incentive for increasing over prior month performance (5% increase), but also a negative incentive for decreasing prior month performance (2% decrease). Our investors feel that the plan is not “KISS”.

I am reaching to my industry colleagues for advice as it relates to incentives that reward positive cash flow and is KISS. Any advice is appreciated.

We've had a mix of different goals that are met, such as over 95% occupancy as a portfolio, 100% leased as a portfolio. Bonus money was shared with the entire multi-family apartment. This does't help with an on-going program though once those goals are met.

We've also had incentive plans with reaching goals of NOI and renewals, but the formulas always seem to be complicated, so if there is anything simple that has proved to be effective, I'd listen!

Here are some thought I have on employee incentives; based on what I have seen:

Maintenance should be included and be rewarded based on things like longevity without a loss time accident, percentage of work orders completed within 24-48 hours, and turns completed under a maximum limit. Let me elaborate:

Let's say the property has a team of 2 maintenance people for these examples.

Safety: Put $200 in a bucket per month and pay it out quarterly for each month that they go accident free; divide it in 2 ($100 each for each month: $300 each).
Work orders: establish a goal to complete work orders within 48 hours of submission. Put a $1000 quarterly bucket aside and pay based on percentage completed. Say they complete 80% of all work orders within the quarter under the 48 hours. Pay them 80% of that $1000 ($800 /2: $400 each)

These 2 comprise bonus $ of $700/quarter.

Turns: let's say you give the team a 5 day limit to complete turns in and pay $50/day less than the 5. Let's say they complete a turn in 3 days. This gives them $50 for 2 days: $100. Take this and put it in a quarterly bucket and pay out whatever is in the bucket on a quarterly basis.

Leases: If you have a team; you will need to put this money in a cumulative bucket and divide equally among the team to minimize fighting. If you can document that a lease was created from initial contact to move in by one team member, then pay the bonus to the team member; otherwise put $50 per lease into the quarterly bucket and divide whatever is in the bucket on that basis to distribute to the team.

Renewals: Same deal as new leases; but I would place more value on them as these did not cost anything in terms of external outreach marketing to accomplish. It means that your team is doing everything right. I might consider including maintenance on this bucket.

Thanks for sharing this. I like the turn bonus as we're thinking of changing the leasing bonus to days vacant, so this will help insure that the apartments get ready!