technician pay question

[partsman103]

we are doing away with techs making "X amount" per hour and going to a percentage rate per hour.
As an example, in the past a tech earning 25.00 per hour would now be earning 30% of the labor dollar amount charged on the RO.
Anyone doing this with their techs?

[btk]

I never seen anyone do this before, I look forward to the responses-it sounds initially like it could be a pay cut for the technicians, you are basically asking them to participate in any discounts given by the service advisor or by any service specials-I dont know if I agree with that.It also sounds like you might be setting yourself up for some infighting between techs and advisors as far as what they should charge a customer for a repair-that never is a good idea.-Good luck

[robc]

Back to the future - in the 70's and prior there were a lot of shops (and almost all the independents) set-up this way. Bob Atwood at the NADA has been a proponent of this system as well.

The negatives are certainly there, but it does have some positives -

1) Keeps A-techs off the low gross stuff since they will want to tackle the full-boat heavy diag stuff and not the cheapie brake pads, etc.

2) Keeps the advisors more honest about pricing because now they will have the techs pressuring them to maintain the ELR as well.

3) Frees up the need to watch gross because it is built in. It will always be what it is set at.

4) Gets us away from the "how many hours" discussion that is outdated and really focuses on - how much is the job price.

I can imagine it works best when you have a good high-end rate to balance off the low-end discount items.

== Rob ==

[partsman103]

RobC,
If this was the "norm" back in the 70's, how did we get to where we are now? (using the hr rate per job)
Our service dept ELR is 56 and some change for 2006 and thus why the change.
We are a small delaership (6 total techs including oil change personell) and really only 1 tech will be effected in a negative way while the others would either benefit (slightly) or have no change in pay. (based on 06 figures)
The 1 tech effected in a negative way is our 1 and only trans guy and has tons of experience.(also brings extra work (ie customers)to the service dept.)
We're asking ourselves if this change is worth the risk of losing that 1 main cog (tech) to another dealership.

[zekensted]

Why not pay the one extra tech a higher percentage?

In many small markets, dealerships are still doing this.

I used a similar system about 10 years ago, but made it a team system. Lead tech got 12% of everything done in the shop, #2 guy got 10%, number three got 8%, and #4 got 5%. That guaranteed a 35% cost of sale, and all the guys worked together.

The only problems were created when someone missed a day. The discounting didn't play into things, since we expensed the discounts most of the times.

Anyone try to raise there warranty rate high, and use that rate and warranty times only for labor times? We were at $55.00 an hour and tried to raise warranty and customer pay to $70.00 and use warranty labor times. GM didnt go for that one - big suprise!

[Old Irish]

I can't go along with it. I prefer to consider billing amount and tech pay as totally different things.

I am BUYING labor from them a "x" amount per flat rate hour. I then SELL the labor for whatever amount I see fit.....

Cheers
DD

[FJFXDOPS]

Partsman103,
A large number of Dealership collision repair shops use the percentage pay plan. I suppose this is due to varying labor rates for body vs. paint vs. mechanical repairs, that insurance companies pay. It has worked successfully in that end of the business, so why not the mechanical end? I agree with Rob, it is a way to control the cost of labor without having to put varying costs on maintenance vs. repair. The highest skilled, hence highest paid, guys will naturally migrate towards the higher paying jobs rather than the competitively priced items such as maintenance. As such, one concern to watch out for if you go this way; the skilled tech may be less prone to upsell the maintenance jobs that he sees a vehicle in need of. A good monitoring tool needs to be in place. This could be accomplished via your DMS software or one of the aftermarket products that are out there.
Good Luck!

[GMFXDOPSMGR]

I'll go with Old Irish. You are going to create your labor gross at 70% and lower. This will never allow you to increase your gross profit. You will be "LOCKED". I'll take flat rate over %.

[gmoon]

You have to keep your eye on Gross Profit. I always consider door rate, effective rate and desired GP% when adjusting tech pay. Shooting for below 75% is just shooting yourself in the foot.