How are you paying your technicians?

Management Lucas Deal February 4, 2013

No matter what the position, compensation matters. When you have quality employees, it’s important to have a payment structure in place to keep them — especially in the heavy-duty aftermarket where good technicians are hard to come by.

Today, the two most popular methods for compensating service technicians are a flat-rate system and an hourly system. Each has advantages that can work in your business.

The flat-rate system is gaining popularity in the industry. The system works by charging customers and paying technicians for an equal amount of hours when providing service. If a service provider quotes a fleet two hours to replace two brake shoes, the technician making the repair is then paid two hours in wage to complete the job.

According to Mark Martincic at KEA Advisors, a heavy-duty consulting group, the flat-rate system is a positive influence on technicians because it motivates them to complete work in the time billed on repair invoices.

“The [flat-rate] system is a great way to increase productivity,” he says, “because it allows a service provider to equalize the labor it bills with the labor its technicians provide.”

Under the system, if a technician is paid for two hours of work and completes a job in an hour, he is still paid for two hours. However, if a two-hour job takes three hours, he is only paid for two hours.

Katie Hopkins, executive vice president at Truck Centers, Inc., says her ­company has been using a flat-rate system to pay its technicians since the 1980s, citing benefits that speak for themselves.

“I think it motivates [the technicians] to do their work as quickly and effectively as possible,” she says. “It allows them to create their own destiny.”

By knowing in advance what they will be compensated for, Hopkins says her technicians have a goal to work toward. They want to finish jobs on time and provide as much quality work as possible. She adds that her technicians are responsible for errors made in a repair that require extra work, which means a two-hour job that turns into six due to a mistake still results in only two hours of compensation.

Allowing technicians to participate in training programs throughout the year keeps your workforce up to date on technology and allows your employees the opportunity to grow and mature in their positions.

The hourly system is the most common payment plan in the heavy-duty industry. The system works by compensating technicians a certain wage per hour for the work they perform.

By paying technicians an hourly rate, a service provider has the flexibility to adjust technicians’ hours based on workload. When things are slow, a technician may work 35 hours a week. When it gets busy, they may work 40 or more.

A technician will be paid overtime (commonly a higher hourly rate) in those cases, but if that allows a facility to complete repairs faster it is still a net positive for the business.

Martincic believes most service ­providers operate under hourly technician payment plans for that very reason.

“It does allow [them] to manage repairs efficiently because it keeps technicians working on a repair until it’s completed,” he says. But Martincic says an efficient shop isn’t always the result of efficient technicians.

Quality service managers are what make the hourly payment system really work.

Bill Ryan, CEO at Point Spring & Driveshaft, says he gives his service managers the autonomy to run their locations with minimal day-to-day corporate interaction. He says that allows the managers to motivate their technicians in a way they see fit — maximizing profits for the facility and its technicians.

“There has to be communication and consistent engagement between both sides. You have to make sure the guys in the shop understand everything.” – Mark Martincic, KEA Advisors

An hourly payment system doesn’t work correctly if technicians aren’t motivated.

“We try to have a good, easy-going working environment here, but we make sure the guys know what is expected of them and what needs to be done,” adds Jim Pascale, president at Pascale Service Corporation.

The next step in successfully launching a new payment plan is making sure your technicians understand it.

Allowing your payroll and human resources departments to educate ­technicians about their compensation will make sure everyone is on the same page.

“There has to be communication and consistent engagement between both sides,” Martincic says. “You have to make sure the guys in the shop understand everything.”

Ryan says Point Spring & Driveshaft tries to notify its technicians of any and all financial decisions that affect their paycheck when they occur. The company also tries to keep an open line of communication between technicians and management.

Giving your technicians a little extra to work toward isn’t a bad idea, either. Martincic says goals and rewards programs can help motivate technicians to stay on task, and/or reward quality technicians for doing great work.

Hopkins says Truck Centers’ operating structure features a points system that leads to advancement. Technicians can accrue points for a variety of reasons during the year, and certain point benchmarks allow them the opportunity to move up to different pay grades and into better shift rotations in the dealership.

Each possible step is discussed as well, which keeps technicians abreast of their situation.

“We try to explain to them where they are, and what they can do to stay in one spot or work their way up the scale,” Hopkins says.

Pascale says his business also uses a tiered system to categorize its technicians, and pays half-wages for technicians who take training certification courses and tests in an effort to bump up a tier.

“The guys that really want to get better in their careers do it,” he says. “We encourage it, because we know how beneficial [the classes] are.”

And the more technicians that make their way up the scale, the better. Because even though that costs money, it’s worth it — a good technician is hard to find.

This article is the second in a three part series. The first, titled “Technical Fouls: Finding, paying, training and keeping techs”, published last week and can be found by clicking here. Be on the lookout for the final installment on hiring during a technician shortage next week. 

  • Marybeth Snyder

    Good article, one that discusses the subject that keeps coming back to us year after year. Not all Technicians are good at the flat-rate challenge and yet they produce good quality work at a nice steady pace. May need to pay different Tech’s in different ways. I wonder how employment law applies to the flat rate pay plan. Any input on that?

  • Andy Diesel Power

    I don’t care for the flat rate plan myself. Ive been a Tech for 31 years now and I have never made flat rate times because I take pride in my work quality and appearance (to include pressure washing, paint, zip ties, etc). Flat rate is based on perfect conditions and adds about a 10 % margin for error, I’ve known too many mechanics to reuse gaskets because they forgot one or the parts dept was too far away to go order one, that takes time, not drain both drain plugs on engines that have two plugs, just because it takes more time, not change drums on brake jobs because they were inboard drums, like the lady said below, it might work for some people. And then the older techs do the easier work because it pays better, for instance, an older tech should be performing the inframe overhaul instead of performing six jobs in one day for two hours each, I wouldnt want the tech that was two years out of tech school performing an overhaul on my ISX Cummins. People need to have been there, done that, before they can comment on something.

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