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15 Insurers Raise Labor Rates


Joe Marconi

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Here's a bit of good news from Florida. Gunder's Auto Center, Inc., has announced that some insurers are now willingly paying its increased labor rate, which went from $42 per hour to $48 per hour in June 2012. It's not much of an increase, and in my opinion, way below what's needed to run a quality Body Shop, not mention paying the staff a decent wage. But I guess it's a start.

 

Here's a link to the entire article.

 

http://www.bodyshopbusiness.com/Article/103651/florida_body_shop_seeing_insurers_pay_increased_labor_rate.aspx

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How can they survive on $48.00 and hour?

 

It's really hard. We do alignments, check engine lights and other small repairs for a body shop in my area, and he told me the other day that the insurance companies pay $46.00 per hour in our area. He hates it and to be honest, it leads to a lot of "creative" writing. You know what I mean?

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Here's a bit of good news from Florida. Gunder's Auto Center, Inc., has announced that some insurers are now willingly paying its increased labor rate, which went from $42 per hour to $48 per hour in June 2012. It's not much of an increase, and in my opinion, way below what's needed to run a quality Body Shop, not mention paying the staff a decent wage. But I guess it's a start.

 

Here's a link to the entire article.

 

http://www.bodyshopb...labor_rate.aspx

 

It's just under 15% of an increase. You say in your opinion it's way below what's needed. What do you think is needed?

 

Gunder mentioned in the article he raised it to what he thought was necessary.

 

I look at our P&L twice a month to keep an eye on things. I look more at the quarter marks and look for trends and make adjustments as necessary. We are mechanical not body so I do not have a handle on what a body shop needs like I do with a mechanical. We have had adjusters come in when there is a body shop repair at our shop. We also have had discussions with adjusters when they do not wish to pay our rate. Some good... Some not so good... It goes something like if you only pay to this amount then the customer will just have to pick up the rest. It's an interesting conversation (so to speak) when an adjusters thinks he can tell me what I am going to charge the insurer...

 

Thanks for the link to the article.

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Determining the labor rate for a particular shop, whether it’s a body shop or mechanical is an exercise that every shop owner should perform. If you look at average labor rates across the country you will see a wide range. I know shop owners in some parts of the country that charge $55.00 per hour and other shop owners that charge $120 per hour.

 

I think it’s important to know what your Cost of Doing Business (CODB) is, determine your breakeven, and calculate your return on your investment. Every shop is different. For example, If I own a six bay shop with a million dollar mortgage, new tow trucks and a new alignment machine to pay off, my CODB is a lot higher that a similar 6-bay shop with no mortgage and no other debt.

 

But, with that said, there are some costs that are constant: payroll, utilities, training, upkeep, etc. So, although we cannot take a “cookie cutter” approach, we can make an assumption that is based on what a modern body shop needs to earn. In my opinion, a labor rate of $42.00 is too little.

 

At that labor rate, what do you pay your workers? Assuming a shop runs at 100% efficient (which most times it does not), at $42.00 per hour, you will not have enough labor GP to pay techs a decent wage, unless the shop supplements income with other profit streams.

 

Sorry for the long-winded reply, but I am not for setting labor rates, nor am I telling any shop what to charge. I think each shop owner needs to do the math and determine how to remain profitable. What I can tell you is that I speak to many body shop owners and mechanical shop owners around the country, and the game they need to play with the insurance company when it comes to labor charges does not help the industry.

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