Is Flat Rate the Future for Shops?

[Joe Marconi]

More and more shops are adopting the flat rate pay model. Is this the future?

 

I don't like flat rate pay.

 

I have long paid my techs an hourly rate plus bonus based on performance. I feel this gets my techs motivated with security. Many think my plan creates a dead-beat attitude. I don't think so. My system rewards those who excel and are willing to work hard.

 

Am I wrong? What plan do you have for your techs?

[xrac]

More and more shops are adopting the flat rate pay model. Is this the future?

 

I don't like flat rate pay.

 

I have long paid my techs an hourly rate plus bonus based on performance. I feel this gets my techs motivated with security. Many think my plan creates a dead-beat attitude. I don't think so. My system rewards those who excel and are willing to work hard.

 

Am I wrong? What plan do you have for your techs?

 

We guarantee our techs a fair base pay but have a commission stucture. We wind up paying more than most shops in our area other than the dealers.

[Joe Marconi]

We also pay more than most shop and dealerships. But, I also feel I have the best techs because of it.

 

I know when I worked for flat rate in the 1970's, those lean weeks were tough. I was newly married with a new born baby. I had to work another part time job.

 

I think we should pay our techs a decent wage and reward them when they produce.

[Tom Ham AutoMN.info]

More and more shops are adopting the flat rate pay model. Is this the future?

 

I don't like flat rate pay.

 

I have long paid my techs an hourly rate plus bonus based on performance. I feel this gets my techs motivated with security. Many think my plan creates a dead-beat attitude. I don't think so. My system rewards those who excel and are willing to work hard.

 

Am I wrong? What plan do you have for your techs?

 

A number of shops are having good success with a pay system that is about half hourly and about half flat rate....kind of the best of both worlds and fair to all parties.

[xrac]

A number of shops are having good success with a pay system that is about half hourly and about half flat rate....kind of the best of both worlds and fair to all parties.

 

Do you have any guidance on how a pay plan like that is structured?

[Joe Marconi]

Tom, could you go into more detail with real numbers about that plan?

[autoguy]

Tom, could you go into more detail with real numbers about that plan?

 

I would also be interested in more of a description of how this would work.

[HTI.WERKSTATT]

More and more shops are adopting the flat rate pay model. Is this the future?

 

I don't like flat rate pay.

 

I have long paid my techs an hourly rate plus bonus based on performance. I feel this gets my techs motivated with security. Many think my plan creates a dead-beat attitude. I don't think so. My system rewards those who excel and are willing to work hard.

 

Am I wrong? What plan do you have for your techs?

 

 

As well I'll agree, I to dislike flat rate pay. BUT, at this point in my business, it's my only choice, and with as many shops around that do the same, I'm okay with the fact, but not entirely. I would love to be able to do more for my guy, and sooner or later guys. I never once worked flat rate, I refused. So here I am paying my tech flat rate, and your right it has its ups and downs. I would be interested in atleast getting an idea of how you set up the hourly rate plus bonus based on performance. I may be to small at this point in time, but something well worth consideration for the future. I want to be able to reward good help, and offer incentives as well in the future.

[Joe Marconi]

As well I'll agree, I to dislike flat rate pay. BUT, at this point in my business, it's my only choice, and with as many shops around that do the same, I'm okay with the fact, but not entirely. I would love to be able to do more for my guy, and sooner or later guys. I never once worked flat rate, I refused. So here I am paying my tech flat rate, and your right it has its ups and downs. I would be interested in atleast getting an idea of how you set up the hourly rate plus bonus based on performance. I may be to small at this point in time, but something well worth consideration for the future. I want to be able to reward good help, and offer incentives as well in the future.

 

Here’s my problem with flat rate: I speak to many techs that put in 45 hour weeks, only to get paid for 20, because the shop does not have the work to keep the tech busy. However, the shop owner requires that the tech remain in facility and performs odd jobs like clean up, building repairs, working on tow trucks, company vehicles, the owner’s boat, the owner’s classic car and panting the walls.

 

How many jobs do you know of that mandates the worker to put in 45 hours but pays them for 20?

 

I’m not saying that this is all shops. And, many times the tech is not productive. But, if I tell a tech that he needs to work a certain amount of hours, he needs to be compensated for those hours.

 

For shops that are constantly busy all year long with tons of work and the “opportunity” is always there for the tech to make money, then in that case flat rate works.

[CARMandP]

Joe,

 

That is the way the dealership that I worked at was and that is the main reason that I left. When the work was there, the required 45 hr week wasn't bad when you were turning 50-75 hrs a week. I turned as many as 130 hrs one week (in six days) and set the shop record for the most hours turned in one week. That was a great plan when there was work but like you said, if there wasn't any work, there was no base pay so it wasn't uncommon to turn 30-40 and still have to be there the full week and a sat every 3 weeks. I always wondered how "legal" it was to require us to work hours that we were not paid for. Since I am the only tech here now I pay myself flat rate because its the easiest for me to figure for now. When I get big enough to need more help, I will have to change that.

[Joe Marconi]

Joe,

 

That is the way the dealership that I worked at was and that is the main reason that I left. When the work was there, the required 45 hr week wasn't bad when you were turning 50-75 hrs a week. I turned as many as 130 hrs one week (in six days) and set the shop record for the most hours turned in one week. That was a great plan when there was work but like you said, if there wasn't any work, there was no base pay so it wasn't uncommon to turn 30-40 and still have to be there the full week and a sat every 3 weeks. I always wondered how "legal" it was to require us to work hours that we were not paid for. Since I am the only tech here now I pay myself flat rate because its the easiest for me to figure for now. When I get big enough to need more help, I will have to change that.

 

My point exactly, well said!

 

I can't tell my people to put in a 50 hour week and only pay them for 20. I understand the principle of rewarding hard work. But, hard work with no pay makes me wonder. And like you said; is it legal?

 

Many shop owners don’t agree with me but I pay a base wage with a performance bonus. The base pay is usually less than what the tech wants to make, this makes them a little hungry. In good times we all make money, in hard times we tighten our belts a little. But how can you ask a tech to take it on the chin in bad times and then ask him to go the extra mile when it’s busy. It’s the reason why I left the dealer in 1980.

 

If we are ever going to raise the level and image of the auto business we need to find ways to pay a decent wage in order to attract the right people.

[Gonzo]

My point exactly, well said!

 

I can't tell my people to put in a 50 hour week and only pay them for 20. I understand the principle of rewarding hard work. But, hard work with no pay makes me wonder. And like you said; is it legal?

 

Many shop owners don’t agree with me but I pay a base wage with a performance bonus. The base pay is usually less than what the tech wants to make, this makes them a little hungry. In good times we all make money, in hard times we tighten our belts a little. But how can you ask a tech to take it on the chin in bad times and then ask him to go the extra mile when it’s busy. It’s the reason why I left the dealer in 1980.

 

If we are ever going to raise the level and image of the auto business we need to find ways to pay a decent wage in order to attract the right people.

 

I'm like Joe, I pay a base salary... (what I call... "just enough" to get by on $$) then the main focus is on the performance bonus or % of actual sales that they accomplish. I even have an incentive if you manage to stick it out on a slow week where there is very little in bonus/perfomance... be here a whole 40 hours, you get your base pay and a 100 to 150 bonus.. just for being here. That works on the busy weeks and the slow weeks too. It's worked well for years. However, now with the economy taking a dive, and... some of the other shops lowering their labor rates... I may need to come up with a new plan. Cause the guys are staying... and I'm a paying... and the work is off and on...

Hey, lean times, just hanging around waiting for spring... Gonzo

[Tom Ham AutoMN.info]

Tom, could you go into more detail with real numbers about that plan?

 

Joe:

 

Sorry to take so long to reply. The plans I am referring to pay the tech a basic wage for the hours they are at work, and then pay a progressive incentive based on production. The lows of flat rate are higher, and the highs of flat rate are lower. But, the system is still significantly tied to incentive enough to make good production critical to excellent pay. Similar systems can be created for advisors and parts managers.

 

Hope this helps,

[Joe Marconi]

Joe:

 

Sorry to take so long to reply. The plans I am referring to pay the tech a basic wage for the hours they are at work, and then pay a progressive incentive based on production. The lows of flat rate are higher, and the highs of flat rate are lower. But, the system is still significantly tied to incentive enough to make good production critical to excellent pay. Similar systems can be created for advisors and parts managers.

 

Hope this helps,

 

This is basicly just like my plan. Also, I agree, you need tie it around an incentive based program.

[xrac]

My guys are paid on a commission with a guaranteed base. We have four different categories that pay different percentages but they are paid the percentage on both parts and labor. My lowest paid guy is guaranteed $400 per week and my highest paid is guaranteed $700 per week. On any given week they can make more but they will never make less. My techs work 44 hours per week most weeks but once per month they only work 40 hours. Paying techs flat rate without some base guarantee is not something I would feel right in doing.

[DUFRESNES]

Well here goes! We pay on performance. We pay flat rate from $28.00 to $35.00 flat rate to our ASE TECHS. Our Lube techs and minor repairs are paid $12-$15.40 per hour with a 5% commission on parts and labor. They are ASE in a few fields. All of our staff and techs work for a bonus each month. It is a group bonus based on the best previous same month equals March for any other March etc. We post our stats on the our back refer. It ranges from $50-$500 per month per person. One half is paid on their check and one half is paid into their 401K. This seems to work very well. Our fellows really seem to like the system. We pay more than most. We have excellent employess. One has been here 25 years. We have a marketing manager. It is her job to see that we have the cars to work on. It is the techs job to inspect and let the Service Writer know what is needed and then it is the SW job to sell. If the business is slow, then it is time to do a quick e-mail and fill the bays. When business is down we all share including myself, the owner.

[xrac]

...... When business is down we all share including myself, the owner.

 

When business got slow for us during 2009 for a three month stretch instead of laying anyone off we ask the ones that could afford to do it to work a four day week. Myself and my service manager also took a $100 per week pay reduction. Our guys really appreciated the fact that we all shared in the situation. Fortunately it was only a brief time period.

[Joe Marconi]

It amazing the level of appreciation shop owners have for their employees and the willingness to tighten their belts also during tough times. This is why I have the utmost respect for my fellow shop owners.

[xrac]

It amazing the level of appreciation shop owners have for their employees and the willingness to tighten their belts also during tough times. This is why I have the utmost respect for my fellow shop owners.

 

Joe, our technicians are our life blood. They work hard and help us be successful. We owe it to them to try to look out for them and be as fair and honest with them as possible.

[Joe Marconi]

Joe, our technicians are our life blood. They work hard and help us be successful. We owe it to them to try to look out for them and be as fair and honest with them as possible.

 

I think you need to be shop owner to truly understand who we really are. Agree?

 

We are a rare breed.

[Brianp]

I have one tech whos flat rate and 2 that are salary. The flat rate guy averages over 40 hours in a week. He has been as low as 32 and as high as 55. Our buisness isnt slow so the work is not an issue. I dont have a "lube tech" I dont want my guys being paid on what they sell due to the possibility of it interfering with what is really needed or what they want to do. Aan air filter that is ok tell next oil change may be needed and brakes that have 5k left will be needed due to the bonus $. It creates to much possibilites for coruption in my opinion. Now in shops that dont have the work thats the owners responisbility to make it happen. The tech should be creating work. My guys are also some of the highest paid in the area and we are one of the buisiest shops.

[Joe Marconi]

I have one tech whos flat rate and 2 that are salary. The flat rate guy averages over 40 hours in a week. He has been as low as 32 and as high as 55. Our buisness isnt slow so the work is not an issue. I dont have a "lube tech" I dont want my guys being paid on what they sell due to the possibility of it interfering with what is really needed or what they want to do. Aan air filter that is ok tell next oil change may be needed and brakes that have 5k left will be needed due to the bonus $. It creates to much possibilites for coruption in my opinion. Now in shops that dont have the work thats the owners responisbility to make it happen. The tech should be creating work. My guys are also some of the highest paid in the area and we are one of the buisiest shops.

 

Don't fear corruption too much. I think you need to put faith in your process and in your people. I have been doing this for a very long time, and my main fear is the inability of my people to sell the work, not selling unneeded work. Yes, I know some may take advantage and those people need to be let go, but most people are honest and just want to do a day's work and get paid for it.

 

Set up processes to indentify needed work and programs to help the people in service to sell the work. If you are truly looking at each car in its entirety and looking out for the customer's best interest, the rest will fall into place.

 

All my techs and service advisors are training to look for potential work with each car. We always address the customer's main concern first, but always make it a rule to inspect the entire car and inform the customer of needed preventive service or other needed repairs. That, I feel is my job.

 

If you don't do that, you not helping the customer or yourself.

[Dennis R.]

More and more shops are adopting the flat rate pay model. Is this the future?

 

I don't like flat rate pay.

 

I have long paid my techs an hourly rate plus bonus based on performance. I feel this gets my techs motivated with security. Many think my plan creates a dead-beat attitude. I don't think so. My system rewards those who excel and are willing to work hard.

 

Am I wrong? What plan do you have for your techs?

 

 

We pay a base wage of about $8-10 per hour plus $10 and up per billed hour depending on their ability. I worked flat rate at a dealership and some weeks we starved and some weeks we made a lot of money but the ups and downs really sucked. We have paid this way for the last 24 years and have had a good reception of it from our techs. By paying them an hourly wage if we do have a slow day they are still being paid to spruce up the shop and make it even more organized and looking great. We have them give lots of input on doing any reorganizing of equipment, parts, supplies, oils etc. and when it is there idea they are gun ho on making it work.

[Brianp]

My flat rate guys still make good money even on a slow week say they flag 30 hours. 30 Hours is still a decent salary. I could see changing my pay system if I could not keep a tech busy but at this point my newest tech(been here 13 years) is still on flat rate. His checks fluctuate a little like last week he got 52 hours and the week before 42 but either way I like it. I could switch him to salary but I feel I could possibly be screwing him on those weeks he flags 40 + hours and I wouldnt feel right in doing that.

[SCHOHAAN]

I agree with the flat rate module, I pay all my techs and customer service guys and all others a guaranteed base pay. I also give them an incentive, that is install an engine and get an extra $150, also we work on a percentage or commission. if the shop makes more, we all make more, if the shop is slow, I take the hit and pay everyone the base pay. As a result alll my employees are happy and hard working. I also give all of them a full Health Insurance paid by the shop. I have the best techs. in my shop and most of them came from dealerships. that I think is the fair way, (after all they also have to provide for their families). and they know what they will get what ever the economy does).

Kingsun Auto & Tires

Oklahoma City, Ok

Email me

My link

[CollinsAutomotive]

We also pay more than most shop and dealerships. But, I also feel I have the best techs because of it.

 

I know when I worked for flat rate in the 1970's, those lean weeks were tough. I was newly married with a new born baby. I had to work another part time job.

 

I think we should pay our techs a decent wage and reward them when they produce.

 

 

this greatly depends on the volatility of the shops cash flow and the local economy. If you go out of bussiness paying salarys, your not doing your tech any favors.

[Habershaw Automotive]

Joe, I have recently joined this website, due to what this topic is all about. I am a guy living in Sarasota, Fl where the work is all based on season. from May to late September/October, work slows down alot. I've decided to go out on my own, and try and run my own place. I feel that it's very hard to make a decent living here working for someone else, due to the whole flat rate trend. I say flat rate is good, if you live somewhere, where work is there throughout the whole year, but not in places where people vacation. I've worked for shops where I'd be there for over 40 hours, yet not make that pay due to the flat rate deal. It's just frustrating to work for people who make salary because they are management, and the techs make nada. Anyways that's my rant, on a side note, I could use some help from anyone willing to give me advise on the whole starting the business aspect, haha I can tell you now, I have only a business name, and a couple locations for a shop, I need more advise on the administration aspect. any help would be greating appricated, Thanks!

[FROGFINDER]

We all get salary. If you are at work you get paid. If not you don't. We ALL work on shop upkeep when "slow". We can change if we have to but that has worked since 1978.

[Joe Marconi]

Joe, I have recently joined this website, due to what this topic is all about. I am a guy living in Sarasota, Fl where the work is all based on season. from May to late September/October, work slows down alot. I've decided to go out on my own, and try and run my own place. I feel that it's very hard to make a decent living here working for someone else, due to the whole flat rate trend. I say flat rate is good, if you live somewhere, where work is there throughout the whole year, but not in places where people vacation. I've worked for shops where I'd be there for over 40 hours, yet not make that pay due to the flat rate deal. It's just frustrating to work for people who make salary because they are management, and the techs make nada. Anyways that's my rant, on a side note, I could use some help from anyone willing to give me advise on the whole starting the business aspect, haha I can tell you now, I have only a business name, and a couple locations for a shop, I need more advise on the administration aspect. any help would be greating appricated, Thanks!

 

It would impossible to give you a full-blown business management course on how to run a business in the lines of this forum, but we can help you. First, many shops are in areas where the time of year plays a big role in keeping the bays busy all year round. “Assuming” that everything is being done to maximize the car count and sales, a shop owner needs to understand the overall numbers of the business. In other words if we spread out the sales across 12 months, what would the average monthly sales be?

 

Knowing this number and calculating your breakeven will help you budget your check book. You can then calculate what you pay someone based on these figures.

 

If you base a tech’s pay solely on flat rate in some cases, the tech will be riding a payroll rollercoaster. The problem will be in the slow months because he will have not budget his money and will come up short in the lean months.

 

Create a base pay plan that takes into account the average sales income across the year. Build some sort of incentive based bonus that rewards the tech in the good times, so he will want to work harder when the work is there. If you budget correctly, there will not be a drain on the business.

 

Again, I go back to making sure that a shop is doing all it can to maximize its potential will play a key role in reaching sales goals.

 

I hope this helps and look forward to you continued contributions to the forums. Good Luck!

[Habershaw Automotive]

thanks for your input Joe, just very eager to get my feet wet here so to speak.

[Joe Marconi]

thanks for your input Joe, just very eager to get my feet wet here so to speak.

 

Always here to help in any way I can. Conversation is key to learning.

[Superman]

I know this is an old topic but thought I would way in anyway. I have been a mechanic for 13-1/2 years and have been paid flatrate and hourly plus commission. One job I made $10/hr plus 10% commission on labor, another job paid $7/hr plus 15.5% of parts and labor after the first $1550, but they also figured overtime into the commission. That job payed the tire/lube techs $10/hr plus 9% of parts and labor after the first $650, not including tires. All pay scales have there pros and cons. Whatever the pay scale I think commission/bonus needs to be some aspect of it.

[5 Star Auto Spa]

We also pay an hourly rate plus a percentage of labor and parts for jobs that were recommended and sold based off of a technicians recommendations. Joe, how is your performance bonus set up for your techs?

[Joe Marconi]

When a tech is hired we monitor and track the production hours sold against what the tech works. We do this for 4 to 6 weeks, depending on the level of the tech. We then get a base, (the average the tech produced in that time). For example; if a tech works 40 hours and is averaging 35, that becomes the base, or the min level of expectation, he needs to make before he makes a bonus. Anything after that he will get another hour of pay for each hour produced. So, if he books 40 hours in a 35 hour week, the tech will get another 5 hours pay.

 

But the goal is to get the tech to 100% - for every hour worked. We raise the bar each month until the tech reaches 100%.

 

We like this because the tech competes against himself. We don't set the min standard, the tech does.

 

The techs like it because they are motivated to earn more, but will also get paid for the hours they work. Again, if a tech works 40 hours and produces 45, the tech will get paid for 40 and a bonus of 5 more hours.

 

Hope this is clear, if not let me know.

[Exclusive Auto Care]

Very interesting responses from all of you.

 

This is what we do at our shop please correct me if I am not doing it the correct way.

 

We use Real Time Labor Guide. I dont know how good of a system this is but it works for us now.

 

My husband is alone in the morning while my workers go to school. They dont get to the shop till 2:00pm.

Their rate is $16.50 an hour and we pay according to labor guide, for instance if a job takes 3 hours they will get pay for the 3 hours at their rate. If they take 4 hours they will still get pay for only 3. We always have work, so they are always busy. They clean their work area, and they also have their own tools. I would like to pay them hourly from the time they get here to the time they leave. That way I can have a little more control over them and I can set rules and regulations. Unfortunately, our shop is not there yet. I dont want to take the chance and pay them hourly when we dont make the money. By us paying them flat time, I know that we made that money for that week.

 

Is this a fair system? Am I doing something that Is not right or Ilegal?

 

I want to be fair to my employee they are good techs.

[nmikmik]

When a tech is hired we monitor and track the production hours sold against what the tech works. We do this for 4 to 6 weeks, depending on the level of the tech. We then get a base, (the average the tech produced in that time). For example; if a tech works 40 hours and is averaging 35, that becomes the base, or the min level of expectation, he needs to make before he makes a bonus. Anything after that he will get another hour of pay for each hour produced. So, if he books 40 hours in a 35 hour week, the tech will get another 5 hours pay.

 

But the goal is to get the tech to 100% - for every hour worked. We raise the bar each month until the tech reaches 100%.

 

We like this because the tech competes against himself. We don't set the min standard, the tech does.

 

The techs like it because they are motivated to earn more, but will also get paid for the hours they work. Again, if a tech works 40 hours and produces 45, the tech will get paid for 40 and a bonus of 5 more hours.

 

Hope this is clear, if not let me know.

Joe,

I am wondering how do you pay them during those 4-6 weeks of gauging their performance.

Thanks!

[phynny]

Very interesting responses from all of you.

 

This is what we do at our shop please correct me if I am not doing it the correct way.

 

We use Real Time Labor Guide. I dont know how good of a system this is but it works for us now.

 

My husband is alone in the morning while my workers go to school. They dont get to the shop till 2:00pm.

Their rate is $16.50 an hour and we pay according to labor guide, for instance if a job takes 3 hours they will get pay for the 3 hours at their rate. If they take 4 hours they will still get pay for only 3. We always have work, so they are always busy. They clean their work area, and they also have their own tools. I would like to pay them hourly from the time they get here to the time they leave. That way I can have a little more control over them and I can set rules and regulations. Unfortunately, our shop is not there yet. I dont want to take the chance and pay them hourly when we dont make the money. By us paying them flat time, I know that we made that money for that week.

 

Is this a fair system? Am I doing something that Is not right or Ilegal?

 

I want to be fair to my employee they are good techs.

If you go strictly by the guide then you are doing them a serious disservice. The labor guides are a starting point for a new clean rust-free vehicle and even then they can hardly ever be met.

[Exclusive Auto Care]

If you go strictly by the guide then you are doing them a serious disservice. The labor guides are a starting point for a new clean rust-free vehicle and even then they can hardly ever be met.

What do you suggest Phynny? They are very hard working individuals and they also have a family I want to be able to pay them fair.

[5 Star Auto Spa]

Joe what is your typical hourly rate for your techs (A level, B level and C level) before any commission or bonuses?

[nmikmik]

What do you suggest Phynny? They are very hard working individuals and they also have a family I want to be able to pay them fair.

Let me try and Pynny (or anyone) can correct me.

He is suggesting not to follow the labor guide strictly because then you will NOT be fair to your mechanics and/or yourself.

The point here is that you must charge the customer more money per job especially if you know that it will take longer, more involved work for your mechanic to do that job.

For example the labor guide will say 2.3 hrs to replace "whatever that is" but your mechanic and hopefully you, see that it's an old car, rusted bolts, "rusted" customer that will require a 1/2hr explanation of the job been done. You need to increase the above 2.3 hrs, to let's say 3hr or 3.2 hr, depending on above difficulty.

This way you are not shortchanging (underpaying) your mechanic because they will get paid for the amount of time it took them to perform the replacement of the part.

I am going to sound like a broken record, but what you really need right now is training for yourself as an owner/service writer/office manager - that I suspect you are serving as right now. I do not suggest the coaching at this point, but a day or two of "business jump-start" would be very beneficial. If you suspect that you are easy to sell to, don't go because most of these companies are in business of coaching rather than seminars. I saw Mspecperformance gave you a very good suggestion of taking a parts supplier training, they should have less interest in selling you anything else other than training. Maybe find a course on-line you can take, but take something. You will have a much better understanding of the process, terms and your future plans after you take the training.

hope this helps,

[phynny]

Exactly, I've wrenched for a long time so I have a realistic labor time in my head already. On a small 1-3 hour job I would up the time 25-30%. On a large job, IE an engine, I charge by days and a 2-day or 16 hour minimum. So if the book says 10 hours, I'm charging 16. If it says 18, I'm charging 24. His has worked very well for us and we have never had complaints.

 

We pay a small salary plus a % of labor and I do not want a job rushed. By using these times we are normally always within an hour of my estimated time. On tranny jobs I add 50% on to the time and again it works out perfect. On electrical troubleshooting I charge by the hour.

 

If the job calls for 10 and I charge 16 and do it in 8 I will charge around 12. Customers LOVE getting a lower bill than they were quoted.