Putting together a compensation and incentive plan for the instructors in your tutoring business is complicated. While there is no one way to do it, you should consider many factors. Here are just a few:
Where are you?
Markets that are home to top universities will have an abundance of qualified instructors. This impacts instructor pay rates. The number of school-age students in your market will impact how many kids need services which will in turn also influence instructor pay. This is the basic supply and demand of your area.
However, what kind of tutoring business you operate can be much more significant factor in setting instructor rates.
The broker model is a volume business. It requires an online infrastructure that efficiently connects prospective students with instructors. Often the parent or student searches the site for an instructor. Most of the administration beyond tutor scheduling, collecting payment, and paying tutors is managed by the tutors themselves.
Tutor brokers typically price services quite a bit lower than the other models and also pay the instructor more. They are happy to take a smaller cut of the revenue for managing less of the service. Volume makes up for the thinner margins.
Pay rates for tutors in the broker model will be dictated by the supply and demand situation of your local market. Research the rates of competing broker services that cover your same area as well as those of individuals offering their services directly.
At the other end of the tutoring business spectrum is the premium service model. Premium service doesn’t mean that you have to pay your instructors more. In fact with well developed programs, administrative oversight, and instructor training, the premium service provider is often able to hire younger, less experienced instructors at lower pay.
Markets with local top universities enable premium service providers to hire highly qualified instructors in their Freshmen and Sophomore year. These instructors are very trainable and often stay with the company for two to three years. Premium service companies can enjoy both lower instructor costs and higher service fees. This model requires a greater commitment to developing programs and personnel but provides the largest per-session margins.
Create an instructor training and development program. This will allow you to hire less experienced instructors who are more likely to stay with your company longer. Hire charismatic instructors with strong communication skills and excellent subject matter expertise. Use your training and development program to create a consistent, uniform, and superior pedagogical approach. This is becoming more important over time.
The bar has been set fairly low in the tutoring and test preparation market. Many current companies’ instructors receive little in the way of initial or ongoing training. But this is changing. Those with well trained instructors are positioning themselves to be much more competitive, with better margins, and ultimately more profitable. If you don’t have the time or experience to create and implement a training and development program, contact LearnSpeed. We help companies with this all the time.
Be careful how your use financial compensation. Provide at least semi-annual or better yet quarterly performance reviews. Tie incremental raises to basic objective job performance. This looks like following standard procedures and being on-time to work and on-time with reports, etc.
Do not give bonuses or raises for higher order skills that require cognitive engagement, like doing a great job helping students as a tutor or as a test prep instructor. Research has shown that financial reward can help to encourage mechanical skills. However, when the skill requires any amount of cognitive engagement, higher financial rewards can backfire leading to lower performance. Check out this great YouTube video for more on this. https://www.youtube.com/watch?v=u6XAPnuFjJc
Create a clear, compelling, and unifying Mission Statement for your business. Why does your company exist? Financial compensation only goes so far to motivate and rarely helps to create a positive work culture. Financial compensation and rewards do not replace a clear purpose. Of course, people need to be fairly compensated. But being a part of a team that is making a difference in people’s lives, with a compelling and unified mission, leads to much deeper engagement and loyalty.