paying techs a Percentage

[Forum Admin]

Nineball asked is anyone paying techs a % of their labor sold rather than flat rate ?? if so are there any formulas you can offer me.

Unfortunately something weird happened and his post got borked and no one could reply to it - so here it is again

[Old Irish]

Decades ago I worked at a place where the techs got 40%. I think it was considered archaic even then....although in the 70s we didn't have variable labor rates or discounting of any kind, so it was workable. At least you knew how your gp% was gonna look at the end of every month ...because you were locked in

Honestly, I haven't heard anything about this method is ages.

I prefer to think of tech pay and billed labor as two different things. I buy labor from a flat rate tech at "x" amount and then resell it at "y" amount, with "y" being whatever suits my fancy, so to speak.

Cheers
DD

[Sun Dawg]

Have used this pay system for over Two years now.
Works very well, admit I was not sure out of the gate.
General Techs 30%
Trans 33%
Elect & Diag 33%
Trim 26%
PDI 26%
GM Store with 16 techs

[spwilkins]

I used this pay plan in a shop with 5 techs, who together could fix anything. Really good team chemistry has as much to do with its sucess as anything.

15% to lead tech/shop foreman
8% to really good B tech
7% to average C-B tech
5% to D-C guy who knew how to upsell

Missed days was a real problem though...never got a good handle on what to do then.

[robc]

Of course the drive here is to remain consistent on gross, it often depends on the techs involved if it works well for your shop.

First, the example shops above show something south of the ideal 75% gross - so that is usually when the wheels come off the cart. If it works for you great - it certainly can - but just plan and watch your gross.

Second, a side benefit is to encourage the A techs to not do the low gross maintenance stuff - which is fine if you shop has it. It depends on your work mix if the A techs figure out that end up taking a pay cut.

Third, your techs have no control over what you charge for labor - so why should their pay be based on it. It would be like paying a service manager on new car gross. Think techs get upset when you shave a few tenths on a job, wait until you told them you gave the customer a 10% discount and by proxy so did they.

== Rob ==

[topshop]

The major flaw in a percentage system is that the techs get a raise any time you increase your labor rate. For example...a new administration is elected to office and taxes double on businesses (OK...let's be realistic....triple) and the business is forced to massively increase its labor rate just to break even. So the techs either end up with a huge raise (now have to raise rates even more to cover that) or you have to tell the techs their percentage cut is being significantly reduced.

We used to pay percentage and getting good GP was a constant issue over the years as costs of doing business increased mainly for this reason. Specific dollar amounts give you much better control in the long run.

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Tom Ham
AutomotiveManagementNetwork.com