Tech pay vesus labor rate

[Doug]

Who among us bases tech pay on the dealer retail labor rate?

I often review tech pay and benefit packages to ensure that we stay competitive within our area.

However, I always make is abundantly clear that our labor rate and our pay rate are two entirely different things. I buy the labor and then re-sell it.

If staying competitive means paying a tech $20/flat rate hour (for an example), then so be it. However, what a *sell* that labor for is entirely out of the technicians circle of concern.

How 'bout the rest of you guys?

Doug

[Ronc925]

I agree. The tech makes a decision to work for you at a specified labor rate. What you re-sell the cost for is up to you.

A couple decades ago I think techs were paid on a percentage of the labor sold. That was before dealers started paying for part of uniforms, insurance, worker's comp., 401k plans, etc. That, and with variable labor rates becoming the standard, it has gone away.

That said, we all know that when techs see you have raised your door rate, they all want an additional piece. So planning your pay reviews (based on performance) and your rate changes (based on the market change) at the same time is recommended.

Ron

[Billybob]

If techs complain about the margin between their pay and your door rate ask them if they want to get paid on the net? Sometimes it's a healthy thing to t least educate them about the expenses of you department that affect it's profitability.

[chucks]

Here are a couple of thought starters: Billybob, your suggestion about paying on the net isnt so far fetched. In my years as management I have had what seems like every pay plan possible, but the most sensible always stood out as being a reasonable base salary plus a percentage of my departments net. What is so wrong with the idea of doing the same for a technician? Or any other employees for that matter. Years ago we had a not so fancy term for this arrangement, we called it profit sharing. It encouraged co-operation within the company, individual productivity, customer oriented and profit oriented attitudes. In recent years sharing the profits with the producers has become an unpopular concept in much of the business world, and along with the change employee loyalty has been on a steady decline. I have also spent time working as a tech, always flat rate, and usually with no minimum or guarantee; so I can say from experience that it is a pay plan which encourages isolated me type thinking; keep in mind that although we managers use the very real increased costs of doing business as justification to increase our door rates, the technicians are experiencing many of the same types of increased costs, in tools, insurance, fuel, vehicles, and everything else associated with their business and their life. This may not be a comfortable subject for our company-profit oriented mindset, but that does not make it any less a fact. We are seeing an ever increasing number of our good to excellent technicians leaving not only our dealerships, but the automotive service industry completely, more often than not due in large part to the money issues. So if you are only making comparisons to how other the automotive service facilities in your area are paying you are probably not paying attention to the increasing trend of our technicians to move out of our business altogether. You need to be also looking at how the building trades, and the other types of business that are getting our ex technicians are paying. If we dont start right now to make some positive changes in the outdated technician compensation system, we had better realize that the day is drawing near that our service departments are going to be no better, and possibly worse, than the neighborhood tire store in with regard to skill levels.

[This message has been edited by chucks (edited 03-11-2004).]

[This message has been edited by chucks (edited 03-11-2004).]

[Bret]

Whilst customer pay is not tied to a percentage for tech pay, whatI recieve from the manufacturer as a warranty rate certainly is.
What I pay my techs is based on that, in fact the last raise I gave them had that clearly in mind, giving the dealership a much higher warranty rate.
Customer pay is $9.00hr higher, no one complains though as I do pay a gaurantee, which I feel is essential to keeping techs.

[fburrows]

chucks:

I think you are right on. I ran the fixed operation in the same dealership for 29 years. For most of those years we paid 20% of the net profit back to the employees as a profit sharing bonus just before Christmas. The owners theory was that he had to pay 50% of the profit as tax anyway and this way he could reward his employees for their efforts. It made a huge difference and everybody felt like they were part of the team. Managers were all paid on net profit and the owner told us that if we were underpaid then it was our fault and if we made a lot of money he congratulated us and told us he hoped we did better next year. We had the highest CSI in the zone and I went on a lot of trips.

We paid a smaller percentage of labor to our techs than the city average but we always brought up the profit sharing bonus when we discussed pay.

The owner died and his son took over and changed all his fathers outmoded ideas. I dont have to tell you what happened.

The retention of good technicians is the key to success in the service business. You might be the king of your 20 group in gross but if you dont retain your good people and attract good people your business is doomed.

------------------
Frank Burrows ABS
fburrows@absdata.com

[CroweChizek]

Shouldn't technician productivity and efficiency be included in these discussions. If labor on an inspection is 2 hours @ $50 an hour or $100 and the technician is paid $25 per hour and it takes him 1 hour and he does 2 inspections in 2 hours doesnt he get booked for 4 hours making $100. And he doesnt have to pay for rent, utilities, insurance, support staff ..

[chucks]

Yes, P&E is a critical part of the overall picture. The more productive and efficient the a tech is the more gross (and net) the company will realize from his/her work, especially when we consider that the employees fixed costs (the company paid portion of the med insurance, uniforms, workman's comp, etc) will be a diminishing percentage of the gross profit that he/she is producing. For the example given, the company is grossing %50 on the inspections, therefore the company is realizing a gross of $100 for his 2 hours worked, the same as the tech. The more the tech gets, the more the company gets. The company should of course, per the guide, be realizing a gross percentage more in the range of %70, with only %30 going to the tech. The next statement is interesting, because I know for a fact that all of my techs have to pay for rent, insurance, utilities, fuel, equipment/tools, medical insurance, taxes, FICA, etc. And the amounts they have to pay for these things keeps going up at the same rate as they do for the company. As I stated previously, this is a fact that we as managers dont like to acknowledge, but that doesnt make it any less a fact.