Flat Rate Pay’s Continued Unpopularity
A survey by Carlisle & Co. found that nearly one in four techs are satisfied with their careers, citing flat rate pay as an issue in their roles. The survey, completed by 35,000 techs, revealed that only 21 percent were pleased with flat rate pay.
And while that type of pay plan has experienced some decline, according to the 2018 Ratchet+Wrench Industry Survey, flat rate pay was still the most popular pay plan (at 30 percent).
Cecil Bullard, chief executive officer of the Institute for Automotive Business Excellence, isn’t surprised by techs’ dissatisfaction regarding flat rate pay.
“I’m hoping, at some point, our industry gets completely away from flat rate. I don’t think it’s necessarily a good way to pay, in most instances,” Bullard says. “My hope is that it goes away.”
According to the survey, flat rate is the top reason that technicians plan to leave their current jobs.
Ratchet+Wrench sat down with Bullard to learn more about why flat rate pay is undesirable among techs as well as how to re-capture technicians leaving the industry to the payment method.
Why is flat rate pay unpopular among technicians? What issues arise with paying technicians a flat rate salary? (How does a flat rate salary affect employee retention?)
What the dealerships have done in the past—I mean 25 years ago—if you were going to be a dealer tech, you were going to be an A-tech and you were going to pretty much line up all the work. So, you could do a job that was a seven-hour job in three hours, and get paid seven hours for it. And so, flat rate was a well-known and very accepted form of getting paid.
The dealerships made a change in the ’90s and they decided they wanted to have more C-techs and not as many A-techs. They’ve also taken away hours on these jobs, so now, when you get a three-hour job, it’s a three-hour job at the dealership—plus they’re not paying these techs like they used to pay these techs. That’s probably one reason that the techs feel as though they’re getting cheated and it’s not fair.
Another reason is really that the shops that are doing it in many cases don’t have enough process—things don’t flow smoothly in the shop, so that techs can’t be productive. We see that all the time. I go into shops and I’ll look at their productivity, which is 50–60 percent, and you start asking questions about that lack of productivity, and start looking around and it’s really the fact that the shop doesn’t have good estimating processes and digital inspection processes.
How might using a flat rate pay plan affect employee retention for technicians?
I don’t build any flat rate pay plans anymore; every pay plan that I build is a combination pay plan. There’s multiple ways to pay technicians—hourly and salary don’t really work because there’s no motivation to work harder, and then there’s flat rate.
I think if you have a shop that runs very well that has good process where a technician can be very productive and you have lots of work lined up, then flat rate is fine. In fact, it’s a very motivation-heavy pay plan and that’s why we use it, to try and get the technician to work a little harder and do a little more. But if you don’t have good systems in process and you don’t have work lined up a week ahead, then you’re not going to keeps techs on a flat rate pay plan.
What we find when we come into businesses is that you have a bunch of technicians there and most businesses have too many techs for the workload they have. If it’s a flat rate shop, the owner is like, “Well, I don’t really care, because if they don’t do hours, they don’t get paid, and it doesn’t cost me.” The problem is, you have a bunch of techs who are all unhappy because nobody is getting paid and you end up keeping the lowest common denominator techs and not the good techs.
What do you see as the future of using a flat rate pay plan?
I know there’s been some cases in California where the employee sued the employer because of the flat rate system and the courts upheld the employees. I think, at some point, if we’re smart, we move away from flat rate as an industry and we go with what I call a performance-enhanced pay system, which means there’s a decent base—$28 dollars per hour—and the tech earns another $10 or $12 based on what they do.
How can independent repair shops capture those who are leaving technician jobs in the dealership world?
The first thing that the shop owner really needs to do is learn how to run the business correctly through margins, systems, processes, real management leadership. When a business runs well, now we can go out and we can attract those guys because we pay them more. Many of the shops that I work with, the techs actually got paid 20–30 percent higher in other businesses because they were very productive and because the performance-enhanced pay system creates the ability for me to pay this guy more based on the fact that he is really productive and he does a great job.