Tuesday, February 4

Feeble Minded Mystery Shoppers Bring Everyone Down (Part 2)

Scale Used by the Pennhurst School in the early 1900's
Do you accurately value the cost of your time and the overhead of running your mystery shopping business?

Most shoppers do not.  On the whole we have little experience running a business, so we tend to compare the pay we are offered for a doing a shop to the hourly pay we would get at a regular job.

The problem with this is that 1099 (independent contractor) work is not an apples-to-apples comparison to the traditional W-2 employment arrangement.

Let's take a look at what one might expect as an employee for a convenience store.  I looked at Glassdoor.com to find out what an average store employee earns and then checked out the benefits section for a couple of different C-store brands:

Average Hourly Rate:  $8.23/hour (it's important to note that a revealed auditor would likely be equivalent to a more senior position than this "cashier" position.  For perspective, the average pay for an assistant store manager is $10.17).

Benefits:  Health, Dental, Vision, Life Insurance, Flexible Spending Account, Paid Vacation, Paid Holidays, 401(K) matching retirement plan.

As an employee, the company you are employed by also pays 6.2% of your pay in FICA (the employee pays 6.2% as well, so 12.4% of your compensation goes to this government program).  The employer pays for unemployment insurance, too.  The employee does not see this, but it is a real cost for a program that will compensate the employee if they lose their job through no fault of their own.  Additionally, most employers pay mileage if an employee is asked to work at a location different than their home store.

According to the Bureau of Labor Statistics (http://www.bls.gov/news.release/ecec.nr0.htm), in the private sector "Wages and Salaries" average 70.3% of total compensation; "Benefits" average 29.7%.  So, in reality, that clerk who is paid $8.23/hour is actually receiving close to $11.71/hour in real compensation including benefits.  The assistant manager earning $10.17 is receiving $14.47/hour.

But we can't stop here.  Before the mystery shopper can even consider his fee as compensation, he must first deduct his business expenses from the fee.  Remember, as an employee, your employer pays you when you are training.  Once you arrive at your job, your vehicle is no longer costing you anything to operate.  If paperwork has to be generated or computers and office equipment consumed, the employer is paying those expenses.  As contractors, we are paid by the job.  Training, getting there, supplies (for printing paperwork, entering reports, etc.), the risk of non-payment, time spent searching for new jobs, downtime, insurance, etc. are all our responsibility.

Real Life Example

I was recently offered a route of 70 gas station audits.  The mystery shopping company limits the work on these routes to 20 jobs per day.  The jobs were spread out, some as far as 170 miles from home.  I could either complete 20 jobs and return home, thus adding mileage to the route, or pay for a hotel for three nights (which assumes I completed the job over 4 days, the minimum required by the company).  Forget the hotel, let's go with mileage:  I estimated I would have driven 900 miles to complete the route.  At $.56 per mile, my vehicle would cost me $504.  This includes gas as well as a portion for future repairs, the wear and tear on my vehicle, and insurance.  Other expenses I would be responsible for include tolls and providing my personal camera, an SD card, a computer, Internet access, and electricity.  I am also required to wear business casual clothing.  I will assume I work 12.5 hours the first three days and 7.5 hours on day four (includes travel, time at store and time entering reports at the end of the day).  As if that weren't enough, the company requires me to make a purchase at each location (to generate a receipt) which would not be reimbursed.

My Overhead and Salary

$504 Vehicle Cost
$70 Unreimbursed but Required Purchases
$20 for Miscellaneous (a nominal figure for tolls and use of my personal equipment and utilities)
$527 Salary ($11.71/hour, 45 hours)

Total Overhead and Salary Cost:  $1,121 ($16 per location)

Actual Compensation:  $490 ($7 per location)

Were I to accept this route, I would undoubtedly lose money.  There were four routes offered in Central and South Florida; all were assigned within 24 hours of being offered.

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