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Multiple shop labour rates


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I've been thinking about multiple labour rates for a while, but I wasn't sure if this was viable. (note the numbers are subjective and generalized)

 

- You've got a lube kid doing oil changes, topping up fluids and washing cars etc. He's paid $15/hr

- You've got an apprentice tech learning, doing basic & intermediate repairs, preventative maintenance and is building his tool inventory. He's paid $24/hr

- You've got a journeyman tech doing high level diagnosis, complicated repairs, and has the most tools and training. He's paid $30/hr

 

I was thinking why is there only a single labour rate in most shops, whether posted or unposted?

I understand that most shops bill out their LOF and brake repairs as such, not based on hours but a flat fee for the job, but why not standardize it and have multiple labour rates?

Even in states who are forced to post their labour rates, posting your top level rate and having standardized lower rates could benefit?

 

Using the industry standard 70% margin on labour, you would get the following labour rates:

Lube kid: $15 / .3 = $50/hr

Apprentices: $24/ .3 = $80/hr

Journeymen: $30 / .3 = $100/hr

 

I've been reading a lot of online articles and blogs about this and finally came across the following:

http://www.autosphere.ca/carcarebusiness/2013/03/28/5-average-shop-labour-rates-now-required/

The critical quote: "The better shops now have in place the following labour rates: 1. Maintenance 2. Diagnostic 3. Reflash 4. Fluid 5. Tire Install. Some shops even have a couple of others due to the type of services they can provide."

 

I was wondering if anyone does this? If so, how did you set yours up? Do you post multiple rates or are they generally internal?

Maintenance would probably be something like $80/hr in this case, since your top techs generally aren't required.

Industry standard for diagnostics would be $180-200/hr, since it's the most complicated, requires the most training and tools, and also to maintain a proper profit/hr for that bay since there are no associated part sales.

Reflashing I'm not entirely sure but I would think it would be around $125-150/hr for the same reasons as diagnostics, but not being as complicated and take less time.

Fluids would be around $50/hr

Tires $80

General repair would fall under the $100/hr rate

Car wash would be around $50/hr, while having a dedicated detail specialist would command higher rates, but mainly sell packages unrelated to actual time (which is what shops should be doing more of anyways haha)

 

Anything I'm missing? Anything you folks would like to add or comment on?

Edited by bstewart
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We have sub categories for our labor operations, oil changes are $25.00 per hour, State safety inspection 60.00, standard brake work 81.88, A/C Work(not electrical) 84.93, Timing Belts $92.83, Electrical work 99.98, Diagnostic work 119.95 etc. We are not required to post a shop labor rate so it may be an issue in those states that require a posted labor rate.

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We have sub categories for our labor operations, oil changes are $25.00 per hour, State safety inspection 60.00, standard brake work 81.88, A/C Work(not electrical) 84.93, Timing Belts $92.83, Electrical work 99.98, Diagnostic work 119.95 etc. We are not required to post a shop labor rate so it may be an issue in those states that require a posted labor rate.

And what is your "standard" shop rate for normal repairs?

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The closest thing to a standard shop rate is $89.67.

Ok that makes sense, I figured it was probably around $85-90.

 

Any reason that timing belts are done at a 3.5% premium and A/C work is done at a 5.3% reduction vs standard repairs?

The differences seem pretty small, I guess I was wondering why both A/C and timing belts aren't both done at the $89.67 rate?

 

Your other rates make perfect sense, although your diagnostic rate at a 33.7% premium seems a little low to maintain a good hourly bay revenue? It might work well in your situation though.

On the other hand, kudos to you for actually charging extra for diagnostics! Most shops lose so much money because they don't charge properly for diagnostics.

Edited by bstewart
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Our basic rate is derived by using a standard formula in the industry to make a 60% gross profit on fully loaded tech cost. The tweaks are based upon some marketing considerations(Brake work, state inspections), difficulty of the work(oil change services, fluid services - lower, diagnostic - higher). This is an attempt to be competitive on services that are "Marketed" in our area and also to maximize revenue in areas that are less price sensitive and/or more difficult. It is a "First Step" in the process.

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Our basic rate is derived by using a standard formula in the industry to make a 60% gross profit on fully loaded tech cost. The tweaks are based upon some marketing considerations(Brake work, state inspections), difficulty of the work(oil change services, fluid services - lower, diagnostic - higher). This is an attempt to be competitive on services that are "Marketed" in our area and also to maximize revenue in areas that are less price sensitive and/or more difficult. It is a "First Step" in the process.

Right on, sounds like you really put a lot of thought and planning into this!

Great job, it sounds like you're on the right track then.

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  • 5 months later...

Our basic rate is derived by using a standard formula in the industry to make a 60% gross profit on fully loaded tech cost. The tweaks are based upon some marketing considerations(Brake work, state inspections), difficulty of the work(oil change services, fluid services - lower, diagnostic - higher). This is an attempt to be competitive on services that are "Marketed" in our area and also to maximize revenue in areas that are less price sensitive and/or more difficult. It is a "First Step" in the process.

 

Hi,

 

Noobie here. I was wondering if you utilize any type of incentive compensation for your techs. How would these different labor rates impact their incentive compensation.

 

Any guidance is appreciated.

 

DG

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This may.be good idea. Typically i have 1 labor rate $85/hour. I tweak charges by changing the hour time i charge for certain things. I post that my labor time is based on labor guide AND technician experience. So if i feel alldata time is deceptive ill adjust the time (hours) that i charge for thr job. I dont price match. If im cheaper or more expensive its all fine. There are many shops in raleigh big and small. But not many that have good rep for diagnosing properly. So i use that to my advantage. Im not free nor cheap. You pay to have me. But yes i lose on something like oil change at .3 because only make $20 versus $25 or so. I agree that may be good idea for different rate for diagnostics bc does take more to do typically. But i combat that by not capping my diag charge out at 1 hour. If im chasing electrical issue or multiple codes then i need to be compensated. Usually meet customer somewhere in middle so is fair on both ends.

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  • Have you checked out Joe's Latest Blog?

         5 comments
      I recently spoke with a friend of mine who owns a large general repair shop in the Midwest. His father founded the business in 1975. He was telling me that although he’s busy, he’s also very frustrated. When I probed him more about his frustrations, he said that it’s hard to find qualified technicians. My friend employs four technicians and is looking to hire two more. I then asked him, “How long does a technician last working for you.” He looked puzzled and replied, “I never really thought about that, but I can tell that except for one tech, most technicians don’t last working for me longer than a few years.”
      Judging from personal experience as a shop owner and from what I know about the auto repair industry, I can tell you that other than a few exceptions, the turnover rate for technicians in our industry is too high. This makes me think, do we have a technician shortage or a retention problem? Have we done the best we can over the decades to provide great pay plans, benefits packages, great work environments, and the right culture to ensure that the techs we have stay with us?
      Finding and hiring qualified automotive technicians is not a new phenomenon. This problem has been around for as long as I can remember. While we do need to attract people to our industry and provide the necessary training and mentorship, we also need to focus on retention. Having a revolving door and needing to hire techs every few years or so costs your company money. Big money! And that revolving door may be a sign of an even bigger issue: poor leadership, and poor employee management skills.
      Here’s one more thing to consider, for the most part, technicians don’t leave one job to start a new career, they leave one shop as a technician to become a technician at another shop. The reasons why they leave can be debated, but there is one fact that we cannot deny, people don’t quit the company they work for, they usually leave because of the boss or manager they work for.
      Put yourselves in the shoes of your employees. Do you have a workplace that communicates, “We appreciate you and want you to stay!”
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