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Splitting Flat Rate Hours

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I own/run a truck, diesel and offroad performance shop. I have been paying strictly by the hour, but its really not working out. I want to be able to pay my guys better but I cant afford to be hung out to dry on the hours. I have been reading on this forum about flat rate and a performance bonus, I really like the concept, it will keep me in the black and my guys can make more money. I am just not sure how to accomplish this for my business. We do alot of high performance work that requires more than one tech to accomplish. How do you pay? I cant charge the customer double time to make up the difference and I want to be fair to my guys, but on the other hand I have to make a profit also.

So my question is this;


1 How do you come up with a fair number to pay on the flat rate?

2 How do I split the job between the two techs, without going broke?

3 What do you base the percentage on to come up with a performance bonus?


I welcome any and all input to these questions. I need some answers quickly, before I lose one of my best techs to another store. He wants more money, I want to pay him more he is definitely worth it, but increasing his pay scale by-the-hour is killing my profit margin. I know that flat rate is th way to go...



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The issue with splitting tech time must be accounted for properly. Accurate time keepping and record keepping procedures must be designed. If you estimate that a job will take 6 hours and you put two techs on a job, each portion of the job must be broken down into segments of the job. It's not easy at times, but you need to be fair to the customer and fair to the techs. Once the job is broken down, you need to assign the time properly in your managment system. We use Mitchell. In Mitchell you can divide the labor time among many techs and the hours can be split any way you need to. What system to use you? So, splitting the tech hours should not impact the business in any way.


As far as performance bonues are concerned, I would first track everyone's hours for a least a month. I would also make sure you review your Cost Of Doing Business numbers, to know your breakeven and what you need above breakeven. Also, make sure you track gross profit dollars. Basing bonues just on sales or booked hours is not the best way. Find out at what point the shop is making money and base the bonus on this number.


Well I tried BBT software but I could never get it to work properly. I have heard of Mitchell, is it expensive? Right now I have access to ALL DATA, so thats what I use to set our labor rate. I also use Labor Guide to check the numbers.


Any input on the first question? I have heard numbers from 22.00-29.99 per flag hour fare these about right or too high/low?

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Mitchell is very resonably priced. It depends on how many stations you want also. You should speak to a rep for more information.


As far as flagged flat rate hours, there are so many ways to skin this cat. Some shop owners pay the tech a gurantee hourly base, any where from 30 to 40 hours. Then, if they hit a predetermined productivity number, they get a bonus for every hour above that. There are many formulas you can use.


Again, you should track each tech for a month or so, find out how productive they are. Then after you know this, calculate how much you need to book in order to acheive for sales goals and profit goals. This way you are not just coming up with someone else's numbers. This will insure that you are paying bonus and payroll on what the shop earns in profit.


As far as how much to pay...well that's hard to say. It depends on the quality of the tech, the expereince, etc. Plus, many shops pay on a sliding scale. For example, for the first 40 hrs booked, the tech gets $20.00 per hour. Over 40 to 45, the tech may get $24.00 per hr. On and On.


I can tell you that in my area good A techs are earning anywhere from $20.00 to above $30.00 per hr, before bonus.


I know one shop owner that pays straight time to 40 hrs booked (in a 40hr work week) and time and half for anything booked over 40 hrs.


It also depends on you labor rate and how effecient your shop is and how effecient your shop is at selling profitable repairs. Also, how the tickets are written.


It gets kind of complicated. I hope I did not cloud the issue, but as you can see, there's a lot to consider when setting up a pay plan.


Man you aint lying there, that gives me a headache just trying to decipher all that information. But I have to do it so I can get my life back. I started this business with a dream and so far that dream is a nightmare...LOL I owned a cabinet shop before doing this for 20 years,(I know you are now asking yourself what an I doing in this business) did pretty good, 15 employees at one time, running two jobs at once or more all over the state. So I do understand what you are saying its just a bit more complicated than before, but I will figure it out, with you guy's help. Thanks so much for all the advice.


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  • Have you checked out Joe's Latest Blog?

      Auto shop owners are always looking for ways to improve production levels. They focus their attention on their technicians and require certain expectations of performance in billable labor hours. While technicians must know what is expected of them, they have a limited amount of control over production levels. When all factors are considered, the only thing a well-trained technician has control over is his or her actual efficiency.
      As a review, technician efficiency is the amount of labor time it takes a technician to complete a job compared to the labor time being billed to the customer. Productivity is the time the technician is billing labor hours compared to the time the technician is physically at the shop. The reality is that a technician can be very efficient, but not productive if the technician has a lot of downtime waiting for parts, waiting too long between jobs, or poor workflow systems.
      But let’s go deeper into what affects production in the typical auto repair shop. As a business coach, one of the biggest reasons for low shop production is not charging the correct labor time. Labor for extensive jobs is often not being billed accurately. Rust, seized bolts, and wrong published labor times are just a few reasons for lost labor dollars.
      Another common problem is not understanding how to bill for jobs that require extensive diagnostic testing, and complicated procedures to arrive at the root cause for an onboard computer problem, electrical issue, or drivability issue. These jobs usually take time to analyze, using sophisticated tools, and by the shop’s top technician. Typically, these jobs are billed at a standard menu labor charge, instead of at a higher labor rate. This results in less billed labor hours than the actual labor time spent. The amount of lost labor hours here can cripple a shop’s overall profit.
      Many shop owners do a great job at calculating their labor rate but may not understand what their true effective labor is, which is their labor sales divided by the total labor hours sold. In many cases, I have seen a shop that has a shop labor rate of over $150.00 per hour, but the actual effective labor rate is around $100. Not good.
      Lastly, technician production can suffer when the service advisors are too busy or not motivated to build relationships with customers, which results in a low sales closing ratio. And let’s not forget that to be productive, a shop needs to have the right systems, the right tools and equipment, an extensive information system, and of course, great leadership.
      The bottom line is this; many factors need to be considered when looking to increase production levels. While it does start with the technician, it doesn’t end there. Consider all the factors above when looking for ways to improve your shop’s labor production.
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