Pay Plans and Flat Rate

[Joe Marconi]

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[mspecperformance]

I am moving into flat rate for all my techs however to ease into the process I have given guaranteed hours per week to all of them which matches their current salary. I think I will certainly start to see more productivity and efficiency out of this however with a high guarantee I am sure there will be lazy days/weeks.

[alfredauto]

I liked flat rate when I worked as a tech. Because I worked for a publicly traded company, cash money in my pocket compensation was my only motivation to work harder. There was no loyalty to the company. When I worked for a local guy I did well on hourly pay. He hired me out of tech school and I appreciated the opportunity he gave me.

 

What I'm getting at is if your techs have a solid work ethic and care about the success of their company they will work very efficiently. Take their connection with the company out of the picture and money becomes the only motivator.

 

I pay hourly with a guaranteed 40 hour week. Nobody gets sent home early, and if they do they still get paid a full week. I started a bonus plan last year and my top tech likes it. I pay Him 1% of gross monthly, it amounts to an extra paycheck for my guy and he gets motivated to crank out 6 digit months.

[Elon Block]

In my opinion, when it comes to flat rate or hourly, I believe there is no one-size-fits all.

This very important decision can have a wildly positive - or extremely negative impact
on everyone and everything it impacts: Your techs. Your customers. The workflow.

 

And of course, your bottom-line.

 

Because I get this question all the time, I wrote an article about this subject:
http://sellmoreautoservice.com/flat-rate-or-hourly-pay-plans-which-is-better/

 

I'm curious to see what pay plan everyone is using and why you believe it works so well.

 

[alfredauto]

Elons article sums it up perfectly!

[b1qwkbird]

I am currently working on this subject as well. We get a lot of older cars at the shop as well as plenty of new ones. My techs came from a European shop and to me it is amazing to see them breeze through repairs on a 750 Bmw but struggle on an 87 Cutlass. I am contemplating hourly plus percentage because while my guys work 45+ hours a week sometimes they only turn in 13 hours. And this is with a constant flow of cars. The old stuff is killing them.

[Elon Block]

I am currently working on this subject as well. We get a lot of older cars at the shop as well as plenty of new ones. My techs came from a European shop and to me it is amazing to see them breeze through repairs on a 750 Bmw but struggle on an 87 Cutlass. I am contemplating hourly plus percentage because while my guys work 45+ hours a week sometimes they only turn in 13 hours. And this is with a constant flow of cars. The old stuff is killing them.

As I've contemplated your specific challenge, I have a question for you...

 

Have you taken a hard look at your numbers? In other words...

You indicate you have a "constant flow of cars". When you look at the tickets for each tech,

how much work was actually sold during that 45+ hours week? That's the first place to

start to gain clarity in where the challenge is and therefore, how to solve the issue.

[mspecperformance]

I am currently working on this subject as well. We get a lot of older cars at the shop as well as plenty of new ones. My techs came from a European shop and to me it is amazing to see them breeze through repairs on a 750 Bmw but struggle on an 87 Cutlass. I am contemplating hourly plus percentage because while my guys work 45+ hours a week sometimes they only turn in 13 hours. And this is with a constant flow of cars. The old stuff is killing them.

 

The possible problem is that you are not charging appropriately for the work that is being performed. Just my 2c because I've been there.

[b1qwkbird]

 

The possible problem is that you are not charging appropriately for the work that is being performed. Just my 2c because I've been there.

I think you and Elon are on to something with this. It definitely seems like some extra charges are in order for most things. I'm starting to implement a system where the techs write the hours they estimate it will take to complete the job as a sort of worst case scenario. Then we will decide where to go from there. I feel like a lot of hours are slipping through the cracks.

[SMMotors]

I don't work on anything older than 1996 and even then I'm picky. I try to stick to 2000 and newer. I pay hourly with a bonus if the SHOP hits a certain amount of hours.

 

We have a team atmosphere. Makes it so everyone is trying to get the shop the make the money because then everyone has a vested interest in what the shop makes.

 

We base it off our PNL. if shop makes it's 18% gp, we spiff everyone. Makes the techs and office staff more alert on wasting supplies, brake cleaner, pens, ect.

 

We have no problem spending money on things the shop needs. We specialize on a few car lines and only work on those. We are factory tooled with scanners and SI so we are more productive/efficient. If the tech can get a car diag quicker, it's only going to make the shop more money.

 

When it comes to flat rate it's a tough thing. I've seen more techs in the past 10 years burnt out by flat rate. ESO's don't want to pay for labor if the tech isn't working and the techs don't like not getting paid if there aren't enough cars or the SW can't sell. I've seen more discussions on here about charging for testing/diag than I can stomach. If you pop the hood, you charge.

 

My owner taught me that it all starts at the head of the snake aka the office. You've got to have your front office working perfectly then the techs will make you money anyway you pay them. Flat rate, hourly, bonus, it doesn't matter if the front can't get the flow handled.

 

To the OP who talked about the BMW techs only getting 13 hrs. Why do you have a BMW tech working on a cutlas? That's like getting made at your dentist because he couldn't fix you knee. If the BMW tech can knock out the hours on BMW, then I sure would be marketing that I work on BMW and setting that tech up to make me money.

 

If you have someone that can only bill out 13 hours in 45, that's only going to lead to the sale of an unprofitable business. Is it the techs fault that he can work on a 30 year old car, or the ESO for expecting him to be efficient on it and wondering how can he pay the tech differently?

 

Sorry for the long post.

 

Don

[b1qwkbird]

Don I have to say I couldn't agree more that the Bmw tech should be knocking out bmw work. This is why I have invested in an autel and launch to help him out with that. When the euros are at the shop naturally he gets them. And just like how we got a reputation in the muscle car community we are seeing a surge of European cars as well. The tech WANTS to expand his knowledge. And I support him in it.

 

Basically flat rate is failing in my shop and I happened to see this post while I have been contemplating the change. The route I think I am actually going to take will be hourly with a percentage of shop sales as well. Also I have incentives for higher sales that work for my guys. For example right now they have a number to hit in a week and I will take them to the Sweetwater brewery for a tour and sampling. The idea has really pumped them up

[Marksas]

I pay an hourly base rate with .50 increases for each ASE certification and $1.00 for L1. We also have a Profit Sharing plan that pays the service writer and the techs for efficiency. We don't call it bonus because its really profit sharing. The techs have to hit it as a team. At 75% everybody gets $100 at 80% they get $200 and it goes up from there. It's figured biweekly so they can get the extra twice a month and 3 times on those 2 months with 3 pay periods. We have slowly moved the % up each year. It encourages them to help each other and not watch someone struggle. They also look at the end of the day and they have gone through their work they will send someone home 30 mins early to help with efficiency. They may lose 1/2 hr of pay but get a bonus. The service writers monitor it to make sure they are charging accordingly and they also monitor the techs hours. We also pay a flat $50 for any after hours evening training class they attend. We still look at their effective "flat rate" just so we know where they are and we monitor overall labor margins. It's definitely not a perfect systems but it works and the guys get steady paychecks. Most of my guys work a planned 45 hr work week and we don't send anybody home more than 30 mins early unless they want to, but we rarely have that.

[stowintegrity]

What a wonderful discussion thread! I've had flat rate technicians, and hourly, and I agree with the consensus that there really is no "one size fits all". I have, however, come up with a promising program that I think encourages the positive aspects of both types of plans, and avoids many of the negative aspects.

 

The bulk of out technical staff is paid hourly, but as alfredauto stated, my guys don't get sent home early, and in the rarest of occasions when there's truly nothing to do, I'm happy to let one or more of them take off, and I'll pay them for the day regardless. (The guys DO love to fish on occasion, and it feels like playing hooky when they dont have to run straight home for dinner, lol)

 

So I decided that what flat rate guys like the most is that the harder they work, the more they bill, the more they make. What the hourly guys like the most is what they feel is a "steady" paycheck, and earnings they can count on. What I like the most is when I can run the appropriate reports, and see that I can generously pay my staff according to their productivity, and of course, what my customers love the most is that we have very little turnover, they get to know the same faces, & expertise thats cared for their cars on a regular basis for years.

 

So how to make everyone happy? (Or so it seems?)

 

I pay my technical staff hourly, at an agreed aupon rate, with the promise of 40 hours each week. In addition to the hourly rate, they earn a billable time bonus weekly, based on the hours they turn. Basically, its the best of all worlds. They have a living wage they can accept, and since they're hourly, no one is offended if I ask them to pick up a broom when it's their turn, or shuttle a customer to work. On the other hand, since their hourly rate doesn't get them "the whole way" toward being excited about their earnings, I make the top 20% or so of my payroll costs associated with who's billing out the time. The more you turn, the more you earn.

 

One of the benefits to this approach is that I can scale/negotiate the hourly rate based on experience or skill level, and give hourly rates when it's appropriate to do so. Furthermore, I can give generous billable time bonuses on top of their hourly pay that expresses the sense of urgency in being efficient & meeting deadlines for our customers. The affectionate term for this at our shop is, "He who bills...eats."

 

So an experienced technician with multiple ASE certifications may earn $16-$19 per hour in a promised 40 hour work week, but also know that he or she will earn $6-$8 for every billed hour on their sheets for the first 25 hours in a week, and $10 - $12 for every billed hour after that.

 

At the bottom of my example is a guy making $16 per hour, or $640 per week hourly, plus $6 for each of the first 25 hours, and $10 for each of the rest that they bill out. Someone working a 40 hour work week who bills 45 hours in this example would earn a total of $990 in gross wages for the week.

 

From my perspective, it's the same as having paid $25 per hour for the 40 hour week, but I didn't have to do that unless he/she billed 45 hours. When WE make money, my staff makes money. The risk I take is when my staff has little/nothing to wrench. And hey, when things slow down, as they sometimes do, everyone is on the same team, and pitches in, helping whereever they're needed. I love the team atmosphere it produces.

 

Just one man's opinion.

[Joe Marconi]

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