Make Flat Rate Work for You

As an owner, how would you like to pay a technician for working 70 hours on a vehicle when a job should have only taken 20?

No owner does. But that’s exactly what happened to Stephan Cairl, owner of Lonsbury Garage in Angola, Ind., and it wasn’t the first time something like that had happened. He was frustrated with his shop’s efficiency and knew he needed to make a change, but he was worried how his staff would react—especially when it came to pay. 

The moment he finally decided to take the plunge was at a Shop Fix Academy seminar. Aaron Stokes, the founder of Shop Fix Academy and a Ratchet+Wrench columnist, pulled a shop owner on stage to talk about his shop’s current issues. Most of what this owner said resonated with what Cairl’s issues were—staff members were taking advantage of his hourly pay system and productivity was at an all-time low. How strongly Stokes felt about using flat rate blew Cairl away and pushed him over the edge. 

This was Cairl’s sign to officially go all in and change his pay plan. Now, he just needed to figure out how to go about doing it.

The Backstory 

Cairl is the fourth owner of Lonsbury Garage. He actually worked at the shop in high school before going to work at a truck dealership. In 2017, he had an opportunity to take over the business that mentored him from the start. 

When he took over, he wanted to implement his own rules, but keep some of the same ones in tact so as not to cause too much friction. At first, he decided to keep the hourly pay system that was already set up. The shop was always hourly pay and so was the truck dealership he worked for, truly, it was all he knew and the employees of Lonsbury Garage knew when it came to pay plans.

The Problem

Once he got into his ownership role, he started to understand more of the behind-the-scenes workings of a business. One of the largest problems he faced was paying technicians for work that wasn’t completed in an efficient manner. Cairl was paying technicians for hours they weren’t even producing work, and at $16 per hour, it was a hefty difference. And not only did the numbers work against him, but what really irked him was seeing no effort from technicians to get jobs done sooner. After paying one technician 70 hours for what should have taken only 20, it was the final straw; he needed to figure out another option.

The Options

There were a couple of different pay options that came to Cairl’s mind:

• The first involved profit sharing, a system in which staff who work for a company receive a direct share of the overall profits.
• The second pay system he considered was a bonus for productivity, which would essentially get rid of the productivity issues in the shop.
• And finally, he looked into flat rate. With this system, techs get paid for a set fixed rate for every repair.

For what he wanted to change about his pay system, flat rate seemed to fit what he was after; it was the most fair and the easiest to understand, he felt. The problem? It’s not always popular with technicians. According to a survey by Carlisle & Co., only one in four techs are satisfied with their careers, citing flat rate pay as an issue in their roles.

“When you sit down and look at it from a numbers standpoint, the technician gets paid what the company gets paid for the job,” Cairl says. “I tried to put myself in the techs’ shoes and look at it from an owner prospective and found it was the most fair for everyone.”

The Solution

When he got back from the Shop Fix Academy conference, he got to work, pulling each one of his techs into his office to lay down the new game plan.

For starters, he knew he was going to have to find a way to sell this to his staff—he knew they weren’t going to be too happy. To combat this, he raised their pay to $3 more per hour and allowed technicians to work unlimited hours to collect during the week. This way, if they wanted to repair 50 hours worth of repairs, they had the green light to do so. From there, he explained that the faster technicians worked, the more money they could make.

“With $3 more per hour, the tech’s wage has a really good chance at having a significant increase in productivity and pay,” Cairl says.

During this period, he met with each one of his staff to go over their five-year goals, as he usually does. Cairl decided to use this time to go further into how flat rate could help them meet those goals. Essentially, he framed it by saying they would be able to pretty much be their own boss—more money and more control over their earnings. Cairl says he had to sell it this way to get his staff to buy-in.

“It’s a lot more than just punching in on the time clock and going and doing your job,” Cairl says. “It allows them to structure their own bay. They can see what they can attain and see how they can get there.”

Three out of five techs were excited about the system, and the two that weren’t were older and stuck in their ways, so to speak. Because of this, he didn’t want to jump right into flat rate for his staff’s sake, so he gave them a little cushion to implement the process full-on. 

Starting July 1, 2019, he slowly integrated the flat rate system in 30-, 60-, and 90-day increments. For the first 30 days on flat rate, he guaranteed his staff 35 hours per week. So, even if they didn’t turn that much, they were guaranteed that pay (anyone that turned more was paid for those hours as well). Between 30 and 60 days, techs were guaranteed 25 hours, and for the final 30 days, it went down to 15 guaranteed hours. After 90 days, there were no guarantees on pay.

The Aftermath

Not only did the 30, 60, 90 plan work out with ease, but after slowly implementing the system, Cairl saw an instant difference in productivity and billed hours—the ones he thought would struggle actually thrived. Within two weeks, one of his techs doubled his hours. Before implementing flat rate, the tech (who was one of the ones that didn’t want to switch to flat rate) was ranging between 20 and 28 hours; now, he’s averaging 50. Cairl said that tech used to struggle with hours, simply because he didn’t have confidence in him that he could do it—he was his own worst enemy. Once he realized he had the capability, he took off with it. 

On the other hand, one tech took a little longer to get the process down. Cairl says it came down to the 19-year-old tech not accepting responsibility, so it took a little coaching to help him understand this.

“It’s as much effort as you want to put into your job is what you’re going to get back,” Cairl says. 

When it came to his sales, there was nothing but going up. ARO was up by $100 and sales were up by $35,000 in December 2019 compared to December 2018. And after netting $0, he netted $125,000 after just six months—three of those six months were the biggest sales months Cairl has ever had.

The Takeaway

Now, he realizes that he should have initially put his feelings aside and did what was best for the business right away. In other words, if you have an idea that will better your shop, he suggests—like many owners had told him—to stop being a baby and just do it. With this, he says it’s important to sell your vision to your techs and make it worth their while. A decent increase in pay and a cushioned structure to get them comfortable with it can go a long way. 

“I could tell you my biggest tip and it’s what everyone else told me: quit teetering back and forth just do it,” Cairl says.