What is the form of compensation called when a designer is paid based on the final construction cost?

When a designer is compensated based on the final construction cost, this arrangement is termed "Percentage" compensation. This method typically involves the designer receiving a percentage of the overall construction cost of the project. It aligns the designer's financial incentives with the project's budget, ensuring they are motivated to keep costs reasonable. This compensation structure is common in situations where the total cost can vary and allows the designer to receive rewards that scale with the project’s success and final value.

This approach contrasts with other compensation forms, such as a fixed rate or salary, which do not fluctuate based on project costs, and hourly wages, which pay for the time spent rather than an outcome-based incentive. Utilizing a percentage-based model can encourage effective budgeting and project management, making it a strategic choice for projects with varying costs.