Flat Rate Pay Plans In The 1970's

Flat rate pay plans became popular in automobile dealerships in the 1970’s. Prior to that time most dealerships paid their technicians a percentage of the amount of labor the technician generated each pay period. For example 50% of the labor revenue generated. Percentage pay for technicians was phased out in the late 70’s and early 80’s in favor of Flat Rate pay. The percentage of labor pay method was reintroduced again by many dealerships in the last decade with little or no success. In fact most dealers who tried to re-introduce percentage pay have given up on the effort and gone back to Flat Rate.

Flat Rate plans were an outgrowth of the “piece-meal” bonus plans used in World War II to increase production line output. Assembly line

The really good aftermarket shops also pay their technicians a bonus when their revenue generated reached or exceeds a pre-set target, for example $18,000 in monthly revenue. Some shops have tiered bonus plan for example $3500 revenue per week = $200.00 bonus, $4,000 revenue per week = $450.00 bonus. These bonus plans are based on the individual technician’s skill level and the type of work they do. For example the highest skilled technician has the highest hourly pay rate but usually ends up doing diagnosis and complicated repairs so their bonus may be set at a lower dollar amount that an technician who does mostly brake repairs all day.

Question if you were a technician working in an aftermarket shop being paid a salary with a performance bonus would you give that up to go to work in an automobile dealership being paid on Flat Rate? Have you ever wondered why your service department has not been able to hire technicians away from aftermarket shops? They do not want to work on Flat Rate!

Switching from Flat Rate to

We generally set the bonus amounts between 10% and 30% of projected earnings. We use the lower percentages for the lower skilled employees and the higher percentages for the highly skilled employees. For example a technician with a target hourly rate of $30.00 per hour would be paid $20.00 for each clock hour and a bonus of $10.00 for each flag hour. A lower skilled technician with a target rate of $18.00 per clock hour would be paid $16.00 per clock hour and $2.00 per flag hour produced.

Establishing hourly rates for your technicians is as much of an art as it is a science. Edwards & Associates spends a lot of time reviewing past performance, schools attended, certificates achieved as well as attitude and enthusiasm for their work before we establish a target rate for each technician. We also implement our production management system, this ensures that the production manager, the technicians and the Service consultants are all on the same page.

Every good plan has to have contingencies! We offer technicians a 90-day guarantee based on their previous 90-day earnings at the end of the first 90 day period we review and adjust as