Pay for Value Delivered: Why the Pay-Per-Hour Model May Not be Your Best Bet

Call or contact center providers normally bill by the hour — a practice many customers prefer. Though commonly accepted, it begs a question: Is the pay-per-hour model the most profitable for your business? In this blog post, we’ll explore reasons why a pay-per-hour agent compensation model may not be the best option for your contact center and why you should consider the benefits of a pay-for-value model.

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Quality Over Quantity

The pay-per-hour model incentivizes agents to focus on the quantity of work they complete rather than the quality of their work. This can lead to rushed interactions with customers and a decrease in customer satisfaction. On the other hand, paying for value delivered incentivizes employees to focus on providing a positive customer experience, which ultimately leads to higher customer satisfaction ratings.

Improved Cost Management

Research shows that facility-based call center agents work, at most, only about 40 minutes for every hour clocked and billed. Working or not, they’re in their seats, on the clock — with charges adding up. But forty minutes doesn’t equal an hour. That’s a 33% productivity loss — or two and a half hours lost from an eight-hour shift. Multiplied by 100 agents, the result is thousands of dollars in lost productivity and tens of thousands of dollars spent on call center costs and potentially missed sales, every day.

Increased Accountability

When employees are compensated based on their performance, they are more likely to take responsibility for their actions and strive for excellence. In the pay-per-hour model, agents are paid a flat hourly rate, with no real incentives to ramp up output, which has a direct impact on the quality of service. Research points out that the productivity of brick-and-mortar call center workers is directly related to the quality of processes and supervision. Without optimized processes and a skilled management team, agents tend to lack the motivation to excel.

By contrast, agents compensated under the pay-for-value model are more focused and productive. That’s because they only get paid for productive time spent on a call or in service, not for sitting at a computer for an hour. This motivates them to be on top of their game and constantly look for ways to improve their service delivery. Paying for value delivered also encourages agents to take ownership of their tasks, leading to higher levels of engagement and job satisfaction.

Flexibility

The pay-per-hour model can be limiting in that it doesn’t account for the varied needs of different customers. For instance, some customers may have more complex issues that take longer to resolve, while others may require a brief touchpoint. Paying for value delivered allows for added flexibility, as employees can adapt to each customer’s needs instead of being forced to adhere to strict time constraints.

Improved Cost Management

Now let’s look at the numbers — and the real value delivered — in these two different payment models.

After fully-burdened costs and allocable costs, the average hourly rate for agents in the US is $40 per hour. Given an hourly paid agent averages 40 minutes of actual talk time per hour, that brings their effective hourly rate of $60 per hour.

Here’s the math: $40 an hour / 40 minutes productive time = $1 a minute.  60 minutes x $1 = $60.

A typical pay-per-minute rate is $0.65, which equates to $39 per hour. In this model, clients pay for actual minutes worked, not idle time — increasing ROI.

The pay-per-minute model offers a $21 potential savings for every hour an agent works. Multiplied by 100 agents working an eight-hour shift, that comes to $16,800 in savings a day (by way of headcount reductions).

Better Alignment of Goals

When agents are incentivized to focus on delivering value to customers, they will naturally be more aligned with the organization’s larger goals, as customer satisfaction is a key driver of business success. This can help create a more cohesive team atmosphere and improve overall team performance.

The pay-per-minute model motivates agents to be productive, maximizing performance for customers and income for themselves. Call or contact centers can further encourage productivity by sharing some of the bottom-line savings with agents. This can be done by increasing pay rates and offering additional incentives for productivity and performance.

Selecting the Right Model

While the pay-per-hour model may seem like a safe and straightforward option, it does come with its limitations. By paying for value delivered, you can better incentivize your employees to focus on quality over quantity, increase accountability and flexibility, improve cost management, and align employee and organizational goals. These benefits ultimately lead to a better customer experience and business success.

Motivated agents invest themselves in the business. Being more engaged, they naturally strengthen the brands they represent. When it comes to call or contact center services, which would you rather have? Agents paid by productive minutes—generating savings and building your brand? Or agents paid by the hour—regardless of the actual business value they create? Perhaps it’s time to re-evaluate — or revalue — the industry norm.