The Lowdown on the New VIPKid Payment System

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What new VIPKid payment system?

VIPKid’s New Service Fee Structure doesn’t work out too well for most teachers. Photo by Sebastian Herrmann on Unsplash.

Beginning August 1st, 2020, VIPKid will gradually transition all new and existing teachers on the platform to the latest version of the incentive pay system, called the New Service Fee Structure.

This new structure has actually been in effect for all NEW VIPKid teachers since December 2019.

These are two very different systems, and the new one is quite complex, so we hope this article will shed a little light on how the new one works.

How does the new VIPKid payment system work?

TL;DR:

For those of you who don’t want to read all these math calculations, you can get a free, New Service Fee Structure Calculator here to see how much you will make on the new system.

Let’s do a quick calculation to see how the new system compares to the old one. After we do some initial calculations, we’ll dig deeper to show you how this affects you.

Old Incentive Formula:

The old incentive formula had two “levels” that depended on how many classes you taught in one month.

For the lower level, the total payment consisted of your base pay, plus $1 for each successfully finished class, and an additional $0.50 for each class, if you taught 30-44 classes a month.

Example 1: Mary has a base pay of $8, and taught 30 classes in April. She earns $8+$1+$0.50 per class. That means $9.50 times 30 classes, which equals $285.

With the higher level in the old system, you get a $1 bonus (instead of a $0.50 bonus) if you teach 45 classes or more.

Example 2: Let’s say Mary teaches 50 classes in May. This will be enough to bump her up to the next level in the old system. Her pay per class would be $8+$1+$1, or $10. At 50 classes for the month, she would earn $500.

VIPKid’s New Service Fee Structure

The new incentive pay scale is considerably more complicated and also factors in the number of classes you have taught since starting with VIPKid.

The New Service Fee Structure consists of base pay + incentive amount (see Figure 1).

This is a progressive incentive system, so the calculations can get a little more complicated.

Example 3: Let’s say Mary has taught 1450 classes all time. This puts her in Tier 5. Since she taught 50 classes this month (May), her total bonus would be calculated as follows:

She receives a bonus of $.80 for each of the first 20 classes she taught.
Then, she receives a bonus of $1.20 for each of the next 20 classes she taught.
Finally, she receives a bonus of $1.60 for each of the next 10 classes (50 classes in total).
The total incentive money she would receive in May would be $56.
Under the old system, she would have earned $100 in incentive pay. That’s a difference of -44%!

But to get a better picture, we need to look at her TOTAL pay under the new service fee structure:

$56 in bonus pay + $400 (50 X $8) in base pay = $456.

As you can see in the example above, she would have made $500 under the old system. That’s a TOTAL pay difference of -8.8% for the month.

And uif you really like math, you can see that the average incentive pay per class is:

$56 in incentive pay divided by 50 classes, or $1.12.

Under the old system, her average incentive pay/class in this scenario would have been $2.

As you can see, Mary will earn less than she would have under the old system.

What if I teach a lot?

Let’s look at the New Service Fee Structure for somebody who teaches a high number of classes.

Example 4: In June, Mary decides to work a bunch of all-nighters and teaches 200 classes. First of all, the 50 classes she taught in May bring her all-time total to 1500, which puts her in Tier 6. According to Figure 1, her incentive pay would be:

$0.80 for each of the first 20 classes
$1.20 for each of the next 20 classes
$1.70 for each of the next 20 classes
$1.80 for each of the next 30 classes
$2.30 for each of the next 40 classes
$2.5 for each of the next 50 classes
And $2.8 for each of the next 20 classes

In this scenario, her incentive pay would be $401, or 0.025% more than she would have made under the old system.

Her total monthly pay would be:

$8 base pay x 200 classes + $401 incentive pay = $2001

This is an increase in pay of 0.05% from the old system and is only $1 more than she would have made using the old incentive system!

And she had to teach four times as many classes to even reach that rate of pay.

How does it work for more experienced teachers?

Let’s make a final calculation for somebody who has been teaching with VIPKid for a long time.

Example 5: Susan has been with VIPKid since 2016 and has taught 9000 classes and counting. This puts her in Tier 9. She taught 200 classes in June and has a base pay of $8. According to Figure 1, her incentive pay would be:

$0.80 for each of the first 20 classes
$1.20 for each of the next 20 classes
$1.70 for each of the next 20 classes
$1.90 for each of the next 30 classes
$2.50 for each of the next 40 classes
$2.80 for each of the next 50 classes
$3.10 for each of the final 20 classes

Her total incentive in this scenario would be $433. That is 8.25% more than it would have been under the old system.

Her total monthly pay would be $8 x 200 classes plus $433, or $2033.

That is only 1.65% more than what she would have earned on the old system.

**(For the purposes of comparison, we’ve left Susan’s base pay at $8 per class. Given that she has taught 9000 classes, she would quite likely have a higher base pay in reality, because the old system allowed for raises every two contracts.)

How do the two systems compare overall?

Introducing The “Break Even Point”

In order to fully compare the new pay systems we’re going to have to do a little more math. Bear with us.

We have to calculate how many classes are required to be taught at each tier to earn the same average incentive amount per class (or total monthly incentive) as the old system.

This is called the “break even” point.

Once we have this, you can look at your tier and see just how many classes you have to teach per month to continue making the same amount of money.

Figure 2: The “Break Even” Chart. The break even point means the amount of classes per month required to make the same amount of money on the new system as one would have on the old system.

If you’re still feeling a little confused, here's another way to look at it:

Using the old system, it took 45 classes/month to earn the MAXIMUM incentive of $2/class, no matter how long you have been with VIPKid.

The break even point in this chart represents the number of monthly classes you will have to teach in order to earn the equivalent of a $2/class bonus under the new system.

How will this change affect my pay?

Takeaway #1:

If you teach less than 163 classes a month, no matter what tier you are in, you will earn less under the new system.

Yikes. The vast majority of VIPKid teachers fall into this category.

Takeaway #2:

Anyone who teaches less than 40 classes/month gets the same incentive regardless of what tier they are in.

Look at the first two columns of Figure 1. Notice how the incentive amounts are exactly the same! The incentive amount only begins to increase after class 40 for tier 6+, after class 60 for Tier 4+, after class 90 for Tier 3+, and after class 130 for Tier 2+.

Takeaway #3:

The difference in pay is the largest (in a negative way) for people who teach 45 classes/month.

There will be no more large bonuses paid at 35 and 45 classes per month, so the difference is most drastic at these points. This difference will gradually decrease until the “break even” point is reached.

Let's look at some more examples:

Example 6: Johnny teaches 45 classes a month to meet the minimum qualifications for the full incentive amount under the older system. He has a base pay of $8.

In this case, it doesn't matter how many classes he has taught all time.

Old system: Total incentive pay = (45 x $1) + (45 x $1) = $90 ($2/class)

Total pay = 45 classes x $8 base pay +$90 incentive pay = $450 dollars

New system: Total incentive pay = (first 20 classes x $0.8) + (next 20 classes x $1.20) + (final 5 classes x $1.6) = $45 incentive pay (-50%)

Total monthly pay: (45 classes x $8 base pay) + $45 incentive pay = $405 (-10%)

This is a pretty big pay cut for Johnny who is used to getting a nice reward for teaching 45 classes in a month.

Things are also bad for his friend, James.

Example 7: James is experiencing a lull in bookings and only taught 20 classes in June.

Under the old system he would only earn $1 extra per class, because he didn’t reach the 30 classes/month for the extra $0.50, or 45 classes a month for the extra $1.

That amounts to only $20 total in incentives.

His total monthly pay would be (20 classes x $8 base pay) + $20 incentive = $180

Under the new system, total incentive pay = first 20 classes x $0.80, $16 (-20%)

Total monthly pay: (20 classes taught x $8 base pay) + 16 = $176 (-2.2%)

Compared to the old system, the differences aren't as drastic as they are for Johnny, but he is still taking a pay cut.

Takeaway #4:

Teachers in the lowest tiers will earn less under the new system no matter how many classes they teach.

Tiers 1-2 have break even points that cannot technically be reached. Even at Tier 5, you need to teach 218 classes a month to “break even”.

Takeaway #5:

The new system only really benefits teachers in Tier 7+ who teach well above 181 classes a month.

The highest level of the incentive scale starts at more than 181 classes taught per month.

In Tier 7+, the more classes you teach past 180, the more you are rewarded, as demonstrated in the following example:

Example 8: “The Prop King” is in Tier 10 and has taught 300 classes in June.

Incentive pay:

$0.80 for each of the first 20 classes
$1.20 for each of the next 20 classes
$1.70 for each of the next 20 classes
$1.90 for each of the next 30 classes
$2.50 for each of the next 40 classes
$2.90 for each of the next 50 classes
$3.20 for each of the final 120 classes he taught

This equals a total incentive pay of $760 (26.7% more incentive pay than the old system).

Total monthly pay (assuming a base pay of $8 for comparison purposes) = (300 classes x $8 base pay) + $760 incentive pay = $3160 (+5% overall pay increase)

He will earn about 5% more than he did before. Only a VERY small number of people teach this many classes a month AND are at such a high tier.

For comparison, if a brand new teacher at Tier 1 taught 300 classes in their first month, they would receive $209 less (-6.6%) than the guy in this example.

What about my yearly raise?

Under VIPKid’s New Service Fee Structure, there won’t be any more base pay raises.

Your rate of pay will only increase as you accumulate more overall classes and/or teach more in a given month.

However, if you are currently on the old system, and your next contract would have given you a raise, you are still eligible to receive that final raise.

Anybody starting to teach with VIPKid under the New Service Fee Structure will be offered a base pay in the interview and their base pay will not change.

Conclusion

The vast majority of VIPKid teachers will earn less under the new system.

A small number of people will possibly make a little more, but the sheer volume of pay cuts significantly outweighs this.

This is clearly one of many cost-cutting measures VIPKid is implementing in order to remain competitive and viable in the industry.

Don’t forget to check out this free New Service Fee Structure Calculator to plug in your own numbers and see how this change affects you.