Are Your Using Multi Tier Labor Rates?

[Joe Marconi]

With labor rates going up, one concept me also need to consider is multi tier labor rates. For example, performing jobs on heavy trucks is different than work on a Honda Civic, or Toyota Corolla. Also, if you do complicated computer work, electrical and driveability, that requires your top tech with the most expensive tools and training. And those jobs have no part profit. Shouldn't this be billed at a higher labor rate?

Do you have a tier labor rate strategy?  I would like to hear from other shops. 

 

[Transmission Repair]

17 minutes ago, Joe Marconi said:

With labor rates going up, one concept me also need to consider is multi tier labor rates. For example, performing jobs on heavy trucks is different than work on a Honda Civic, or Toyota Corolla. Also, if you do complicated computer work, electrical and driveability, that requires your top tech with the most expensive tools and training. And those jobs have no part profit. Shouldn't this be billed at a higher labor rate?

Do you have a tier labor rate strategy?  I would like to hear from other shops. 

 

We had different labor rates for different jobs.  Sometimes it was because of the difficulty, and other things like risk.  We had our labor rates at the lowest, plain vanilla, straight jobs.  If the vehicle had been chipped, twin turbos, high flow heads, exhaust, or deleted emissions, part labor for those types of vehicles carried a higher premium labor rate.  For me, it's not just about the money as it was about managing risk.

We commonly found when customers make a horsepower/torque range change, the first thing that goes is usually the factory original transmission.  With diesels, this is especially true.  The transmission simply is the weak link in the drivetrain.  They were never meant to handle that much power.   Sometimes it was the extra hard parts/upgrades that drove the price up, which is additional parts on top of the increase in labor.  Our ARO for major jobs was about $3,600 as of 2015.

[Joe Marconi]

6 hours ago, Transmission Repair said:

We had different labor rates for different jobs.  Sometimes it was because of the difficulty, and other things like risk.  We had our labor rates at the lowest, plain vanilla, straight jobs.  If the vehicle had been chipped, twin turbos, high flow heads, exhaust, or deleted emissions, part labor for those types of vehicles carried a higher premium labor rate.  For me, it's not just about the money as it was about managing risk.

We commonly found when customers make a horsepower/torque range change, the first thing that goes is usually the factory original transmission.  With diesels, this is especially true.  The transmission simply is the weak link in the drivetrain.  They were never meant to handle that much power.   Sometimes it was the extra hard parts/upgrades that drove the price up, which is additional parts on top of the increase in labor.  Our ARO for major jobs was about $3,600 as of 2015.

Did you do wholesale work, work for other shops?  And also for warranty companies.  Were there different labor rates for these, and how did you maintain a decent profit margin?

 

[Transmission Repair]

4 hours ago, Joe Marconi said:

Did you do wholesale work, work for other shops?  And also for warranty companies.  Were there different labor rates for these, and how did you maintain a decent profit margin?

 

No wholesale for other shops.  I avoided warranty companies like the plague, mainly because of the hassle factor of plugging up our production.  We only did retail jobs and left the rest to other shops to do.   We had plenty of work to do.

Edited April 19, 2024 by Transmission Repair
To add a final comment.

[Joe Marconi]

On 4/19/2024 at 6:41 PM, Transmission Repair said:

No wholesale for other shops.  I avoided warranty companies like the plague, mainly because of the hassle factor of plugging up our production.  We only did retail jobs and left the rest to other shops to do.   We had plenty of work to do.

Thanks for the info. I think you made the right decision. 

[Linc Lewis]

Yes, at the very least over the last 4-5 years as the industry has changed many shops I hear from have embraced multitiered labor rates. There seem to be 3 major, but common, categories. The Standard Labor Rate is used for common tasks and common vehicles. The European is for as the name implies those more demanding brands or models within standard brands. And finally a Labor Intensive Rate for low parts' dollars repairs like engine rear main seals. We'll also use that rate for R & R or motors trannys etc which are always more involved and usually require additional finessing after the component is replaced. . These varied labor rates would be in addition to an across the board labor guide bump for the additional tasks a tech needs to perform to accomplish any repair. Tasks like finding the keys an SA didn't tag, moving another vehicle to get the one he's assigned, we all know there's a list.  

[Joe Marconi]

On 4/25/2024 at 8:21 AM, Linc Lewis said:

Yes, at the very least over the last 4-5 years as the industry has changed many shops I hear from have embraced multitiered labor rates. There seem to be 3 major, but common, categories. The Standard Labor Rate is used for common tasks and common vehicles. The European is for as the name implies those more demanding brands or models within standard brands. And finally a Labor Intensive Rate for low parts' dollars repairs like engine rear main seals. We'll also use that rate for R & R or motors trannys etc which are always more involved and usually require additional finessing after the component is replaced. . These varied labor rates would be in addition to an across the board labor guide bump for the additional tasks a tech needs to perform i to accomplish any repair. Tasks like finding the keys an SA didn't tag, moving another vehicle to get the one he's assigned, we all know there's a list.  

Agree, Linc. Years back, for general repair shops, it was a lot easier. Today, it is so much more complex. To assure we are achieving our profit margins on labor, shops need to have multitier labor rates.