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New Pay Plan


Truett

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I need to change my pay plan for my Technicians from a hourly wage plus a commission on total ticket. This is what I am thinking about. Anyone have any comments?

Richard Rollins

Forgot to mention we currently are at about 35 to 40 % efficiency. 

Sorry so large but it was copy and paste.....

New Pay Plan

 

The new pay plan will be based on Technicians efficiency. The Technicians will no longer be getting a commission on sales but rather a Bonus based on the ability of the Technician to complete the job in the allotted times.

 

  1.  Less then 50 %                      0 % Bonus

  2.  50 % to 54.99 %                  10 % Bonus

  3.  55 % to 59.99 %                  20 % Bonus

  4.  60 % to 64.99 %                  30 % Bonus

  5.  65 % to 74.99 %                  40 % Bonus

  6. 75 % or greater                      50 % Bonus

     

    Also there is going to be a $100.00 Monthly Bonus for anyone staying above the 60% level for the entire month.

     

    Percentage amount is based on Hourly Wage.

    Percentage is figured on Flagged hours divided by Clock hours.

     

    Example:

     

    25 Flagged hours divided by 30 Clock hours would be a 83% Efficiency rate. This would be a 50% bonus.

     

    20 Flagged hours divided by 35 Clock hours would be a 57% Efficiency rate. This would be a 20% bonus.

     

    19 Flagged hours divided by 40 Clock hours would be a 48% Efficiency rate. This would not result in a bonus.

     

    Overtime would be figured as:

    ((Hourly Wage + bonus X 40) +

     ((1.5 X Hourly wage + bonus) X (hours over 40))).

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I have a lot of questions about your operation and before I can render an opinion on the pay plan I would need some answers.

More importantly, your definition of efficiency is different to how I've been taught. I always believed efficiency is time allotted to actual time doing the work. So, if I am given 2 hours to complete a task and it takes me 2 hours I am 100% efficient. If I take a crap for 30 minutes it is not part of the equation. Other measurements must be take to determine the cause of inefficiency.

Productivity is the difference of clock hours vs hours working on cars (accounts for above mentioned potty break). So if you guys are slow and there are not enough cars the tech does not get a bad rep for being inefficient.

To better explain, 3 times are needed to be measured and calculated. Time on the clock (40 hours, available) time working on cars (actual) and time given per task (billed, booked, flat rate time).

Efficiency is billed divided by actual. A journeyman tech should aim for 135%

Productivity is actual divided by available, aim should be for 90%

If you find your guys are not efficient you need to determine if they are lazy, ill equipped, untrained or unmotivated. Increasing efficiency via pay can only change unmotivated. If you find your guys are unproductive you need to figure out if there are not enough cars, not enough staff or scheduling needs to be looked at. Again, unmotivated is the only factor that might be modified by pay. If your techs need to unload a truck full of tires they cant be working on cars and thats a factor.

How you currently measure does not give me enough data to give an opinion on pay.

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2 hours ago, Wheelingauto said:

I have a lot of questions about your operation and before I can render an opinion on the pay plan I would need some answers.

More importantly, your definition of efficiency is different to how I've been taught. I always believed efficiency is time allotted to actual time doing the work. So, if I am given 2 hours to complete a task and it takes me 2 hours I am 100% efficient. If I take a crap for 30 minutes it is not part of the equation. Other measurements must be take to determine the cause of inefficiency.

Productivity is the difference of clock hours vs hours working on cars (accounts for above mentioned potty break). So if you guys are slow and there are not enough cars the tech does not get a bad rep for being inefficient.

To better explain, 3 times are needed to be measured and calculated. Time on the clock (40 hours, available) time working on cars (actual) and time given per task (billed, booked, flat rate time).

Efficiency is billed divided by actual. A journeyman tech should aim for 135%

Productivity is actual divided by available, aim should be for 90%

If you find your guys are not efficient you need to determine if they are lazy, ill equipped, untrained or unmotivated. Increasing efficiency via pay can only change unmotivated. If you find your guys are unproductive you need to figure out if there are not enough cars, not enough staff or scheduling needs to be looked at. Again, unmotivated is the only factor that might be modified by pay. If your techs need to unload a truck full of tires they cant be working on cars and thats a factor.

How you currently measure does not give me enough data to give an opinion on pay.

You are correct, I meant to say production not efficiency.. My problem stems from an old pay system left over from the former owner that was a Goodyear plan used at company stores.

We pay x dollars per hour and 7% commission on total ticket. Exception is tires. No commission for techs on tires

The techs are making enough that they do not feel any urgency to get work done in a timely manor. I pay them, most times, more they the make the shop. Mostly they do two clock hours or more for each flag hour they turn. 

So unmotivated is what I feel they are. Hoping this will kick start more production. There efficiency is poor also. I was a line tech in my past life and I did turn the 135% week in and week out on full flat rate. Mostly they turn less then 20 hours in a 40 hour week.

There are 3 techs in each one of my stores. A lead "A" tech, a "B" tech and and oil changer / tire guy. I pay them different hourly wages according to their ability. All of them do less then 50% productivity.

Richard

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Richard,

 

Depending on how much your techs make now (actual dollars) you may have a really hard time implementing a new pay plan and getting them to buy in. I am assuming they are coasting by making really good money at 7% a ticket (if its 7% of gross sale). Even at 7% of gross profit they still might doing pretty damn good. I have heard of these pay plans mainly from tire dealers and franchise stores like STS. With margins getting squeezed everyday its going to be hard to keep up with those pay plans. From my experience when you take away something from an employee and they will definitely feel that you are you'll have a really big break in morale. Plan B is to start recruiting.

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1 hour ago, mspecperformance said:

you'll have a really big break in morale. Plan B is to start recruiting.

I am assuming you are making a change in the payroll because numbers are off. I agree with MSPec that you probably need to go into this with a good plan B.

You state your techs are fat and happy. If that's the case all they will feel when you change the plan is that  you are somehow ripping them off. It will not motivate them to do better. IF...they are worth saving....educate them.

Pull out whatever you feel you need to to show them the current state of affairs. Where their productivity is, efficiency, gross profit numbers. Show them where is should be and can be. Educate them on what that means to THEM, not only with pay but how working conditions will improve if the business is making what it should. Educate them on what it means to the business (health). They could really be fat and happy!

Then set expectations of how things will be going forward. Be prepared to make changes because there will be ones who wont want to change, cant change, or are just the wrong people. They will complain the most and you need to carve them out quickly and publicly...the others will take notice and change......

Just changing a pay plan will not accomplish anything (IMO)

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3 hours ago, mspecperformance said:

Richard,

 

Depending on how much your techs make now (actual dollars) you may have a really hard time implementing a new pay plan and getting them to buy in. I am assuming they are coasting by making really good money at 7% a ticket (if its 7% of gross sale). Even at 7% of gross profit they still might doing pretty damn good. I have heard of these pay plans mainly from tire dealers and franchise stores like STS. With margins getting squeezed everyday its going to be hard to keep up with those pay plans. From my experience when you take away something from an employee and they will definitely feel that you are you'll have a really big break in morale. Plan B is to start recruiting.

Yes I think I will have to start Recruiting. I know it is an Uphill battle to get the moral back but if they want a job it may have to be this way or will not be in business for much longer.

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1 hour ago, Stevens Automotive Service said:

This is a very true statement.

 

 Make it a win win for everyone. If you stay the way you are now I am sure you know where you will end up!  

We have tried to show them what their numbers were and what their production is, but if it does not affect them directly they don't want to "Change the status quo ". I feel I have to shake thing up. Want I wanted to know is how this new plan compares to other shops. I have only worked in this system or a full flat rate system. I was very productive in both but always have been self motivated.

As for a Win, If they just reach a 60% level they can be close to their old numbers and if they reach 75% they can make more (and so can I). I am going to approach it in that manor.

Richard

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On 9/20/2017 at 10:41 AM, Truett said:

Yes I think I will have to start Recruiting. I know it is an Uphill battle to get the moral back but if they want a job it may have to be this way or will not be in business for much longer.

You can start a new tech at a new pay plan. If the new guy doesn't get poisoned by the old guys then he should be more productive. The old guys can see the writing on the wall and get on board or you keep recruiting.

I think what you have proposed is too complicated and it won't really get you where you want to go. It might help to move you're current people a little bit, but would not work at all for a new hire...in my opinion.

My techs are flat rate with a bonus based on productivity levels. It's not perfect, but seems to work ok and everyone knows what they need to shoot for. We currently don't track efficiency, but I'm open to ideas.

 

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  • 3 weeks later...

Interesting to hear other shops compensation plans. ( Always a head scratcher ) I do agree there's a time to re-evaluate and find a balanced that rewards techs and maintains shop margins. That said, Our compensation plan we pay an hourly rate plus book hour (Mitchell).  Most jobs are plus .5 - 1 book hour over mitchell to account for older cars and we work largely with computer / electrical issues,  Cleaning up the attempted repair damage from other shops/customers many times. 

As I understand it: Being independant and not entitled to dealership rules, over 40 hours is 1.5 x hourly rate. This seems to work well in shop my two lead techs are solid with many years onboard . Techs 3-4 are not as consistent and becoming harder to find. What experiences do others have with this compensation approach? What compensation approach do you find works better with a younger generation?  I welcome insights, Thanks   

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7 hours ago, dstremski said:

Interesting to hear other shops compensation plans. ( Always a head scratcher ) I do agree there's a time to re-evaluate and find a balanced that rewards techs and maintains shop margins. That said, Our compensation plan we pay an hourly rate plus book hour (Mitchell).  Most jobs are plus .5 - 1 book hour over mitchell to account for older cars and we work largely with computer / electrical issues,  Cleaning up the attempted repair damage from other shops/customers many times. 

As I understand it: Being independant and not entitled to dealership rules, over 40 hours is 1.5 x hourly rate. This seems to work well in shop my two lead techs are solid with many years onboard . Techs 3-4 are not as consistent and becoming harder to find. What experiences do others have with this compensation approach? What compensation approach do you find works better with a younger generation?  I welcome insights, Thanks   

I do not know about the labor rules in your state, but in Illinois we also have to pay overtime (1.5 x bonus hourly rate) on the bonus. Don’t forget about it as it can become costly if you get audited. I was audited last year and thank goodness i had done it correctly.

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Truett, how's the new pay plan working out for you so far? You should have about 3 weeks worth of data. Any improvement? I've been working on my pay plan for techs and I'm implementing it slowly over time. We started out with an hourly pay, plus a bonus for each billed hour over 20, plus a team bonus for every hour over 45. 2 weeks ago I scrapped the team bonus and just divided it up among the two techs. Probably starting in December, I'm going to change to an either/or pay scale. Something as follows: They'll get there hourly guarantee, unless they flag more than 20 hours. 20-23 billed hours, they'll be making $24 an hour, 24-27 they'll be making $25 an hour, 28-31 they'll be making $26/hour, and so on. Numbers are strictly just for illustration purposes, but you get the idea. Again, it will be an either/or, so they either get their guarantee, or they'll essentially be flag rate once they break 20 hours. Again, all numbers are for illustration purposes, as I have not done the math yet to make sure I'm getting my necessary GP, but you get the point.

I know simply changing their payscale, like others have said, likely won't be enough to get things where I want them, so I'll have 90 day reviews going forward to help move techs along. I'll show them where there at, decide where we want to get them, show them how it will increase their paychecks, and set a goal we can both agree on for the next 90 days. Rinse and repeat. Keeping my fingers crossed, as I feel I'm in the same boat as you. Two techs averaging 25-27 hours/week. 

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5 hours ago, mmotley said:

Truett, how's the new pay plan working out for you so far? You should have about 3 weeks worth of data. Any improvement?

Well.....My low end techs (oil changers and tire people) have come up to 55% from about 40%. My "B" techs are now doing around 60% and my lead techs that were below 50% are now running 62-65%. Amazing how that works isn't it.... They are trying really hard to get that $100 bonus for over 60% for the month. Hope this keeps up. Will let you know.

Richard

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      It always amazes me when I hear about a technician who quits one repair shop to go work at another shop for less money. I know you have heard of this too, and you’ve probably asked yourself, “Can this be true? And Why?” The answer rests within the culture of the company. More specifically, the boss, manager, or a toxic work environment literally pushed the technician out the door.
      While money and benefits tend to attract people to a company, it won’t keep them there. When a technician begins to look over the fence for greener grass, that is usually a sign that something is wrong within the workplace. It also means that his or her heart is probably already gone. If the issue is not resolved, no amount of money will keep that technician for the long term. The heart is always the first to leave. The last thing that leaves is the technician’s toolbox.
      Shop owners: Focus more on employee retention than acquisition. This is not to say that you should not be constantly recruiting. You should. What it does means is that once you hire someone, your job isn’t over, that’s when it begins. Get to know your technicians. Build strong relationships. Have frequent one-on-ones. Engage in meaningful conversation. Find what truly motivates your technicians. You may be surprised that while money is a motivator, it’s usually not the prime motivator.
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