Question

John is an accountant and just earned your CPA. John has decided to open up John’s Tax Service on Main Street. He leases a storefront:   his office in the storefront has glass all around it. John has hired an administrative assistant who sits outside his office. His administrative assistant answers phones, receives and sends emails, sets appointments and other administrative type work. Assuming that John spends most of his time inside the office, should John pay his administrative assistant an hourly wage, piece rates or a % or profits? Explain why.

Answer 1

The piece rate system is not suitable, because it is based on the number of units produced. But, the administrative assistant is performing the task that is of an administrative nature and it requires continuous presence of assistant even if he has no any call to attend or reply. The % of profit system is also not suitable, because administrative assistant is not in sales and his role is to assist John in efficient disposing of the work assigned to John and help him focus upon some productive work. Now, it is an hourly wage system that is most suitable for administrative assistant, as he works for the number of hours, per day and number of days in a week, requiring him to be present in the office for each of all the hours of work. The assistant may have 10 calls in one hour or no calls in the next hour, but he has to remain in the office during work hours, assigned to him. So, the hourly wage is most suitable for deciding the compensation of administrative assistant.