Flat rate vs hourly pay

by James Menzies

NASHVILLE, Tenn. – Is a truck repair facility better off paying its technicians hourly, or a flat rate per job? And what is the preference of technicians and customers?

There has been plenty of debate around the merits of flat rate versus hourly pay structures for technicians, whether they work for OEM dealerships, independent shops or a fleet’s own in-house maintenance operations.

A panel at this year’s Technology & Maintenance Council meetings examined the issue from both sides. Scott Witt, vice-president and general operations manager with Virginia Truck Center, said his company pays its technicians an hourly wage, with bonuses. In the end, it’s more of a hybrid system, since technicians are rewarded for completing jobs in less time than is expected.

“If it’s 10 hours to do a clutch and they do it in eight, they are going to get paid (extra),” Witt said.

Bryan Leskowsky, director of service with Peach State Freightliner, spoke in favour of a flat rate pay model.

“Flat rate has got a bad name to it,” he said. “I call it capitalism at its finest. Technicians are motivated to perform and they get paid more than anybody else.”

Leskowsky said his company uses industry standard repair times to determine the rate that’s charged to the customer, and a percentage is then paid back to the technician.

Asked if it’s true that technicians prefer an hourly pay structure, Leskowsky said not always. He told of taking over a shop a few years ago that employed 15 technicians who were all paid an hourly rate with no incentives.

“We told them we wanted to do some type of flat rate, and everyone was nervous that they were going to have to perform,” Leskowsky recalled. After six months, a third of the technicians had left the company, but it was still able to bill $200,000 in revenue per month using the remaining 10, thanks to efficiency gains. The 10 technicians who remained were earning substantially more, while the company reduced its employment-related costs and management time by a third.

Some new hires, Leskowsky said, are earning the equivalent of 113 hours work in an 80-hour pay period. He said most flat rate technicians are 120-130% more efficient than those who are paid hourly.

But those numbers aren’t automatic, he stressed.

“They need the proper tools,” he said. And if your shop can’t get required parts in quickly, technicians will sour on a flat rate pay structure. Ideally, said Leskowsky, shops should allocate two or three service bays for each technician, so they can juggle multiple jobs at all times and stay busy while parts are on order or while waiting for approvals.

“Most of our technicians want to be working on two or three trucks at one time,” he said. “While you’re chasing parts for this one, I’ll jump over to this job. We encourage that.”

Peach State Freightliner will usually allocate two bays to each flat rate technician, and three to its top performers.

“Some other shops are very confined and that makes it difficult for a flat-rate technician,” he said.

Another challenge involving flat rate shops is how to deal with “comebacks” – trucks that return to the shop requiring work to be redone.

Leskowsky said the flat rate technician is required to do any rework that’s required for free.

If the truck visits another location to have the rework done, the technician who did the original job will have it deducted from his next paycheque, Leskowsky said. However, he said comebacks don’t happen frequently with flat rate technicians.

“Nothing tears him up worse than comeback,” he said. “The word pride keeps him from having much quality comeback.”
Leskowsky said the flat rate pay structure creates a true partnership between the technician and shop owner.

“I tell everyone, ‘We’re in a partnership. I provide the building and the tools and you provide the labour.’ We have to show them this is how much the house is keeping and this is how much you get paid.”

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  • In the automotive world no self respecting technician will work by the hour. There is just too much opportunity for a good tech to make money working on flat rate. Its commission based and your paid for the work you produce. No, you’re not paid for your time at the coffee pot or talking about the game with guy in the next stall BUT that’s in part what motivates the tech to produce. A 10 hour job may take him 12 hours to complete the first time but that will make him work harder the next time around and he’ll do it in 10 hours. And the time after that it’ll be complete in 8 hours! There’s a huge sense of accomplishment in beating the Flat Rate times!

    And while there are some techs that will sacrifice quality in order to flag more hours those are a small percentage of the total. In the long run, poor quality work only comes back to bite you in the form of comebacks!

    During my years as a shop owner I generally kept a mix of hourly and flat rate technicians. Frankly, there are a lot of jobs in a shop that you just don’t want a quality technician to work on. It’s not worth their time or your bottom line. And having some hourly techs allows you to develope and evaluate their skills before throwing them into the competitive world of working for flat rate!

  • My question is with flat rate. they pay you only based on what you work on (vehicle you have) but what about during slow downs or lack of work, what will they pay you. and what will encourage you to come to work if they are not paying you at all. Not only that, I am sure most shops want you to do clean up of the shop but thats not included in the flat rate so why would I come in during 8 to 5 shift if I spend 4 hours working, and the rest of the time twiddling my thumbs and they don’t pay me. If I was paid hourly, then I will do above and beyond, ie: clean up the shop floor, if needed wash the car, extra work because I am still on the clock and still being paid so Gotta keep working.

  • Flat rate can become unfair in Canada when working on older model vehicles where it takes twice as long to get old parts off due to corrosion etc. than what the rate plan assumes.

  • Flatrate pay moves a huge part of the risk of a repair shop business to the employee.

    That sucks and shall be forbidden.