AYou are better off either hiring them as an employee or working out an independent contractor situation where they would be paid hourly or based on the job.

APaying them per cake would be paying them per job. The job is the cake.

AIt would be figure out on a per slice basis, but paid in full. I'm not saying I would pay them for 12 servings if that is all they did, if the cakes served 100. I'm sorry I must not have been clear, I. Was just giving the benefit of the doubt most people with reading comprehension were intelligent enough to figure that out.

A

A job may have multiple items, but that's really beside the point. The key aspect to paying by job is calculating how many hours a certain job should take, and paying your employee/contractor based on that labor cost. This adds some overhead for you (and depending on the situation there may be minimum wage issues), but it also protects you from paying more to an employee who is slower than normal.

ASay a cake serves 100 and I charge $350 and buy supplies and bake and fill and it is ready to decorate, and I give them $100-150. That is pretty easy for most people to figure out a percentage on a slice basis. The next 100 serving cake may be a $500 order but cost the same to bake and fill, but have in depth decorating. I could pay $350 for that one.

Anot rocket science.

A

It sounds like you are basing the amount you give them on how long the cake should normally take to decorate (depending on complexity of course), this is in line with my advice above on paying based on the job.

The percentage would be labor cost for decorating (and any other services the employee provides) divided by the total cost of the order. If you want a per-serving amount and the order is only one cake you would just divide by number of servings. If you have preset items that customers can buy you can work out a percentage for each item, but with custom cakes you may need to adjust on a case by case basis.

And you're welcome, by the way. :)

AI would never figure or pay per hour since we are totally different, nor do I care how long it takes them as long as it looks good and gets done. If I set a per hour price for myself, I would have to take a huge cut in pay for some of the simple cakes. For many of those, it works out to $80 an hour. I am not going to go below my minimum price just because I or my contracted person smoked through the order in record time. That is where your formula fails.

AOh my bad, Thanks for nothing. I can figure that out for myself in about .02 seconds. I stated I would divide the profit. I didn't say I needed someone to do it for me. The question was directed at people with current business facing current times. You are welcome to find another thread to pick apart. Please don't respond any further, you are not helping, since you haven't answered a single qustiin and are just arguing about semantics.

A

The price you charge the customer would not change, we are only talking about how much you pay your employee.

The whole reason for job-based pricing is to avoid variance based on how fast or slow a specific employee is. If a cake (regardless of size or price) normally takes 6 hours to execute to the level of quality you expect and you value the decorating work at $20/hour, you would pay the employee $120 for that cake. If they are super-efficient and finish in 4 hours and the quality is to your satisfaction, they get paid $120. If it takes them 10 hours because they are just getting started, they get paid $120. If they rush through in 3 hours and need to put in another 5 hours of rework because the quality is not there, they get paid $120.

A

Basing employee compensation on your profit may not be the best model, because profit includes markup for ingredients and overhead, neither of which the employee is responsible for. You really want to focus on just the value of the work the employee/contractor is providing.

AI will wait for someone that can add something. So far I haven't had any responses, just over complicated rantings that don't pertain to the question.

ARMy part would be the same for every cake, i would take the order, discuss it with the contractor, collect payment, bake, and fill most likely, then my part would be done. I know what it costs me, and an average of how long it takes to do my part, and I would still have my own cakes to bake and fill. The only variable is what the customer is paying, so that part the contractor earns would be the variable. I'd really prefer not to over complicate things, and would pay myself the exact same thing for doing it per cake order. The rest would go to the contractor. Simple.

Yes, some orders cost me more, others will cost me less. It all averages out, and I am perfectly fine with that. I also don't have a greedy bone in my body, so I am perfectly fine and even relish the thought of the decorator making considerable more money

AThan me on every cake she does, and considerably more doing "her specialty" than she ever though she would.

K.I.S.S.

A

This would be an extremely generous compensation package for your contractor, since you would be essentially reversing the roles of entrepreneur and employee by collecting your own costs and a small fixed profit for yourself with all the additional benefits accruing to the contractor.

If your primary goal is to have as simple a compensation structure as possible and you are not concerned about the opportunity cost of lost profits then your formula will work for you.

AI think what you are proposing could work if you got just the right person. If what they are looking for is a foot in the door to build their own business it could be a problem. They might not want to put out a product without their own name on it. However, if they can appreciate what you are offering in terms of an already established business with a solid reputation and customer base, this could work. Have you had much communication with the person you have in mind? You mentioned that she was interested in renting your kitchen; does that mean she wants to be doing her own thing? Or do you have some indication she would be interested in what you are thinking of?

If the work has to be done in your kitchen (because that is where the license is) I don't think you can consider the other baker an independent contractor.  Would have to be an employee.  But please check with your state regulations.

Liz
 

A

Good point. The IRS has a pretty good guide (although as you said some states may vary), in this case I agree that this sounds like an employee situation.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Behavioral-Control

AHmm. I am kind of thinking out loud here but I wonder if a partnership kind of thing would work? Not an equal partner, but a small percentage sort of thing. I really don't have a great handle on small business employee laws and whatnot, especially in the US, so feel free to disregard my thoughts here.

AJust chiming in. I have a lady who I contract all of my sugar flower work to. I'm just no good with it. She's not a partner but I do supply her with gumpaste. I work all that in to my pricing and it's worked out nicely.

While its not the same I just wanted to share that it can work. Don't know that I would want to do it with a complete stranger. But I'm a success story of sorts!

AI know of several independent contractors that do painting and maintenance for an apartment complex and the work has to be done there, but they have to use their own tools, that is the only thing I am worried about. Obviously I would have to look into it further.

ACan u explain more about ur arrangement please

AWhat if she had a license too and she just uses the equipment would it still be considered a employee? [quote name="jason_kraft" url="/t/762622/have-someone-else-come-in-and-do-birthday-cakes#post_7433440"] Good point. The IRS has a pretty good guide (although as you said some states may vary), in this case I agree that this sounds like an employee situation.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Behavioral-Control[/quote]

ABefore you get too far into how you'd pay them, are you even sure they'd be interested in that kind of arrangement? If she approached you about renting your kitchen I'm guessing she's looking to start her own business rather than a job.

Are you proposing that she brings any clients to you and they buy from your business, with her doing the decorating? Is she ultimately going to want to go out on her own, and if she does how will you handle the clients?

A

It's a neighbor I have. She's amazing with her hands, but she's not a baker, and has no interest in being one. So I mix the gumpaste and let it mature, and take it to her. I price the sugar flowers and she gets that part of the money. I get paid for the cake and other decorating. She also is in on the discussion of the design of the cake if they want flowers

Someone privately posted something to me, (because she didn't want to start arguing semantics either), that I will look into further, but this is what they said (edited to stay anonymous and to take out all the hilarious things she said about a CC member)

So, it has been done, and it works, and it certainly was concise, without a lot of added off topic, dead horse beating and BS. HOW REFRESHING! I love it.

A

The situation as described above certainly can work and be fair to both parties if the commission is based on the value added by the contractor. You may think this is "semantics", but it's a critical component of your compensation structure that will help you maintain your profits down the road.

And in any case, I don't think anyone has said this type of arrangement was illegal.

A

The distinction between contractor and employee (from the IRS and the state) can sometimes be unclear. The best thing to do if you have a question is to contact a local attorney with expertise in state and federal labor laws.