Tech pay plan question

[Jimbob661]

I currently pay fate rate. I'm looking at going with a hybrid system with an hourly rate for 40 hrs plus an hourly rate for hours produced. I also want to add some type of bonus system, I guess on hitting a hours produced goal. I keep running the numbers and it seems that the less hours they produce, they more they make an hour, but if I lower the hourly rate, they make less than on flat rate. It also seems that the closer they get to 40 hrs, they less they make compared to flat rate. I'm going crazy running numbers! They are all starting to run together! Am I looking at it right? Or am I overlooking something? Also am I using the right bonus system, or do I need to base it on sales? Any help would be appreciated . Thanks guys!

[mmotley]

Yes, a hybrid system like you describe will naturally cause a tech to make more per hour the less hours they run depending on how you calculate it...

[alfredauto]

Straight flat rate is best for the owner, techs become COGS. A better system for a tech goes something like this: flat salary $10/hr for the first 30(failsafe), 30-40 hours billed $15/hr, 45 hours $17, 50 hours $20, 55 $23, 60 $27.50. 60+ make him a partner.

 

So a tech that comes early stays late bills 60 hours makes $1650 that week. A guy who smokes and txts all day makes $300.

 

Overtime is still required in some states for flat raters so ask your payroll guy first, the guy making $27.50 @ 60 hrs might also get a bonus of 20 more hours OT which is amounts to a lot of money for a tech.

Edited March 5, 2015 by alfredauto

[alfredauto]

Pay based on parts/labor will result in techs replacing rather than fixing, its in their best interest for a higher RO. That might not be best for customer retention. I pay my best guy hourly plus bonus based on gross monthly reciepts, it works because my tech acts as manager, tire salesman, and car salesman sometimes and its the only fair plan I could come up with.

[mmotley]

Straight flat rate is best for the owner, techs become COGS. A better system for a tech goes something like this: flat salary $10/hr for the first 30(failsafe), 30-40 hours billed $15/hr, 45 hours $17, 50 hours $20, 55 $23, 60 $27.50. 60+ make him a partner.

 

So a tech that comes early stays late bills 60 hours makes $1650 that week. A guy who smokes and txts all day makes $300.

 

Overtime is still required in some states for flat raters so ask your payroll guy first, the guy making $27.50 @ 60 hrs might also get a bonus of 20 more hours OT which is amounts to a lot of money for a tech.

 

Agreed. If you are a small, independent shop, techs are gonna be cautious about coming to work somewhere that they might not get a ton of hours. This pay plan will provide a guarantee that they wont go home without a paycheck but that they also have an incentive to hustle.

 

 

Pay based on parts/labor will result in techs replacing rather than fixing, its in their best interest for a higher RO. That might not be best for customer retention. I pay my best guy hourly plus bonus based on gross monthly reciepts, it works because my tech acts as manager, tire salesman, and car salesman sometimes and its the only fair plan I could come up with.

 

I still have yet to become comfortable with paying employees commission off of gross sales, gross profit, net, etc. In my mind, it creates too many opportunities for employees to want to see the numbers of the business. It also automatically gives employees pay raises if you raise your labor rate, parts matrix, etc. Third, it's just too easy to pay techs by labor hours. It's easy to track, it's easy to understand, it's easy to get techs to compete against each other, it's easy to set bonuses off of, etc.

 

Just my opinion though, lots of guys on here seem to pay off of Gross Sales, Profit, Net, etc and are fine with it.

[mmotley]

I should clarify that when I say tracking hours is easy, I also mean it's easy for the employees. Techs and service advisors can manually track their hours for the day/week so they know where they are at for the day/week. Trying to get an employee to know how they are doing with GP, markup on parts, etc makes it tough to calculate quickly and they might lose motivation...

[Shopcat]

Jimbob661, what motivates your technicians? Money? not always! Sometimes its benefits, or flex time. What do you want from your techs? Better inspections? Better accuracy? I say the process starts with you deciding exactly what you need to take your shop in the direction you envision. Next, think about what you need from each tech. Not just the numbers, but career development. For one example consider a $ 1.00 hour raise for each new ASE certification . Leading your team means getting them to achieve their goals while getting you to your goals at the same time. I can be a lot of fun, and you will get to learn a lot more about your team.

[Jimbob661]

I've watched this guy closely and talked with him and it seems he just wants the money. He doesn't take any time off and the only other thing he does is work on stuff at home. He normally is 85-93 percent efficient. Right now he is strictly flat rate with $1 bump per hr at 35 hrs and .50 cent bump every 5 hrs after that. I haven't checked his hours yet this week but he is going to be 100 percent plus. Now today he tells me what he " needs " to bring home every week and it's more than I make. He graduated from a community college program a few years ago and this is his second job as a tech. He is a master tech and does a good job, but I can't pay him what he wants so I'll guess I may be looking for help soon.

[bstewart]

I'd look at doubling his production bonuses if he needs a raise.

Either go to $2 for 35 hours and $1 for each 5 hours after that OR

$1 for 35 hours, $1 for 37.5 hours and $.50 for each 2.5 hours after that.

 

I'd also do everything in my power to get his production above 100%, remove all obstacles that are preventing him from increasing his productivity.

Productivity = profits, and great techs at great shops will be well above 100%, but front counter processes can be a drag on his productivity as well.

If he's producing more, you're making more money so you can afford to give him more as well.

You don't want to lose a good master tech, so at least show him that you're willing to work with him to help him earn more money for the both of you.

[Shopcat]

Since your tech is good and motivated by money, there is a lot of potential . Take a look at the money he wants and set the bar at 60 billed hours, then reverse engineer it to what he makes now in the 40 hour/100 percent area. I do not know your numbers, but I'll demonstrate the idea.

 

00-40 hours $15.00

41-50 hours $ 20.00

51-60 hours $ 25.00

61-+ hours $ 30.00

 

With his pay as an percentage of production, you CAN afford to pay him. Make the rate retroactive to all hours, so a 53 hour week would be $25.00 x 53 = $1325.00 gross. And lets say your at $95.00 hour, this would be 26 percent unloaded cost of labor for this tech. Look at what he wants money wise and put that carrot where its attainable for him and affordable to you. Maybe put the hourly he really wants at the 61 hour plus slot. Like I said, I do not know the numbers. But this tech sounds like he's worth trying to work with. I hope this helps. There are infinite ways to build a pay plan, find one that benefits both of you. Great techs are very hard to find.

[flacvabeach]

This and Service Writer compensation have been the toughest problems to solve for us, but after working for literally months with our ATI coach we have developed pay matrices for our techs that provide a safety net, create incentives for production, allow us to manage overtime pay, and allow us to achieve the labor margins we are looking for. The hardest part has been talking techs who were on an outdated pay plan into adopting the new one. Eventually they see that, with our car count, they can make more money on the new plan.

[Jimbob661]

We use a labor matrix where we add .1 for every full hour the book gives, and then some for broke bolts, rust, etc. I pay a full hour for scan tool hookup and have a charge for each test ( fuel pressure, sensor test, smoke test etc) but he complains that enough time is not allowed for test drives, etc . I guess what I don't understand is that he wants to be paid more than some master techs make at the local dealer who have 25 plus years experience. I'm all for paying a guy what he is worth , but where do you draw the line ? Or am I looking at this wrong?