Ask 10 different automotive repair shop owners their opinion on the best pay structure to attract and retain high-quality, productive technicians, and you’re likely to hear 10 different answers. Or at least seven or eight.
With a nationwide shortage of skilled technicians, economic pressures throughout the industry, and changes in the scope of work needed for modern vehicles, the traditional flat-rate payment system has increasingly given way to more hybrid plans.
For owners, of course, the constant challenge is to balance a need to provide technicians with financial stability–in an industry that can’t afford to lose them–while still motivating them to work efficiently and continuously strive to improve their skills and techniques.
Many shops have built a variety of incentives and bonus structures into their flat-rate plans in an effort to reward productivity and training level. Key metrics such as first-time fix rate, return jobs rate, customer retention rate, and even customer satisfaction scores all can be considered in this type of system.
Meanwhile, a smaller number of owners have decided that hourly pay is a more effective, fair, and straightforward way to maintain employee morale, prevent frequent turnover, and promote teamwork rather than a “me-first” mentality.
Much less common for independent shops is an annual salary system, despite the advantage of maximizing income predictability and long-term thinking by team members. That’s due to its high cost for shop owners, as well as limited earning growth potential for employees.
Most businesses still only tend to turn to a salary plan as a reward for highly trained technicians and shop leaders, all of them people who have long proven that they will pay for themselves in terms of output and value to the team.
At a time filled with challenges for owners and general managers–from rising parts and labor costs driven by inflation, to supply-chain disruptions, to expensive technology and diagnostic equipment required to service newer vehicle models–many shops have frequently experimented with and tweaked their pay plans.
Beyond increasing profitability, their reasons have included changes in top leadership, shifting local market conditions, efforts to attract new talent and incentivization of specific repairs, especially if a business has had gaps in certain service areas.
Here is a look at two successful businesses that have developed–and carefully fine-tuned–two separate approaches on pay.
Years into implementing those plans, each has no regrets.
A1 Automotive: Flat Rate Plus Bonuses
Kendall Warnock owns two repair shops in Lincoln, Nebraska, where he employs a total of 17 technicians and four service advisors.
During his first eight years in business, Warnock used an hourly payment plan as he worked to build up his customer base. Once his shop got busier, he switched over to paying techs based on a “flag time” for each job, based on predetermined industry standards, regardless of how long the work actually took to complete.
It was only in year 11 of operation, however, that Warnock finally created a flat-rate-plus-bonus structure that he is confident is a good fit for him and all of his technicians. Today, he views his main role in that system as keeping his shop busy enough to be profitable for everyone, via smart hiring, equipment purchasing, marketing, and advertising.
“First and foremost, we need to adequately reimburse our auto techs to be able to take care of themselves and their families,” he says. “I think that’s a good shift in perspective that has come about in our industry in more recent times.”
“At the same time,” he continues, “there has to be accountability attached to salary in terms of output. If we do things wisely, tactfully, and empathetically, we can all get better together and serve our customers well. That way, everybody wins.”
A1 Automotive’s pay plan is precise and detailed. Each year, Warnock breaks down the number of possible eight-hour work days in a month, factoring in holidays and weekends on the annual calendar. This year, that ranges from 19 days in November to 23 days in October.
Next, the business sets a threshold of turned hours per month that, if exceeded, triggers bonuses of $1 (Level I) or $3 (Level II) an hour. Technicians can reach Level I by reaching 9.5 hours turned per working day; they can get to Level II by hitting 12 hours turned per day.
Take this November as an example: A tech who turns 180.5 or more hours that month would earn a Level I bonus, while one who turned 228-plus hours would qualify for the higher Level II boost.
In October, on the other hand, working 218.5 or more hours equates to a Level I pay increase, and 276 hours or more to Level II. For both levels, the expectation is no comebacks due to negligence, which prevents any urge to rush through jobs.
Unlike some businesses, Warnock has opted to pay those bonuses on a monthly basis rather every two weeks. “I like that my techs have a whole month to chase their goals,” he explained. “To me, two weeks feels like too fast a turnaround – too much of a rat race for people. You don’t have to be great every day because no one is. You just have to be great overall.”
The system aims to reward efficiency and improvements in techniques and skills, which in turn creates more earning potential for the most high-performing techs.
As for the potential disadvantages typically cited with flat-rate plans – such as a temptation for techs to cut corners, or the risk of unpredictable income during slower periods – A1 Automotive hasn’t had problems, according to Warnock.
One reason is that Warnock hasn’t entirely given up on hourly pay, which undeniably provides greater stability for more inexperienced technicians as they practice and learn skills that can only come with education, repetition, and time.
When Warnock hires a new technician, he keeps them on a fixed per-hour payment plan for their first 90 days as they get up to speed on shop protocols and navigate expected bumps in the road. More seasoned hires can still begin on a negotiated flat-rate plan, he noted.
That strategy was based on Warnock’s own rough start as a young technician about 25 years ago, after he had moved to the city of Lincoln from the tiny Omaha Indian Reservation. He was thrown unprepared into a flat-rate system at a major car dealership and, without proper mentoring, struggled to make ends meet despite regularly working eight- to 10-hour days.
“I couldn’t pay my rent and bills. I was mentally exhausted and demoralized,” he recalls. “I still remember how terrible it felt to be in that situation, and I don’t want people here to feel that way. I don’t want them to decide that they hate the entire industry, because we can’t afford to run our young techs out of the building.”
Once a new technician has been employed at one of his shops for about three months, Warnock holds a “90-Day Pit Stop” huddle so they can mutually evaluate and discuss if they’re ready to move on to the flat-rate payment system.
In some cases, Warnock opts to extend their time on hourly pay by another 60 days, as long as he has seen a good work ethic and efforts to improve on their part. Most of the time, however, he has found that a technician is prepared to make the switch.
The system only works with mentorship from more experienced technicians, Warnock adds. And that, he has learned, has again required flexibility in payment systems–one that factors in a more nuanced definition of what “production” means.
Namely: that metric shouldn’t only translate to hours turned working on vehicles, but to time spent serving as a teacher, mentor, and shop leader.
A1 Automotive, for example, has a recently promoted foreman who has agreed to complete 20 hours of billed repair time per week plus another 20 hours of mentorship, which ultimately sharpens everyone’s focus and skill level in the shop.
“It’s a really good blend for him that also adds significant value to the business,” Warnock says. “This is an industry that will beat you up physically, and it takes a lot of effort and knowledge to get to the point where you deserve such a blend–and we should recognize that. It will only benefit us as owners, too.”
Level 1 Automotive: Hourly Pay
Liz and Keith Perkins, the married co-owners of the Tulsa, Oklahoma-based shop, run a brick-and-mortar location along with a mobile business, L1 Automotive Diagnostics and Programming LLC, that serves both Tulsa and Oklahoma City. They also have a training company, L1 Automotive Training, that has taken them to shops around the country and world.
The couple, who originally started their mobile business in 2018, have five technicians and a service advisor. And they have never wavered from their belief that fixed hourly pay is the best way to keep income steady for their employees, even though Liz Perkins estimates that only about 10% of the people she visits as a trainer have made the same decision.
“They do tend to be surprised, but it really works for us,” she says.
Like Warnock, Liz Perkins was influenced by her experience in the industry. In her case, however, it was in her role as a wife to Keith Perkins, an ASE Master Certified L1 Technician who has worked as an engine machinist and assembler, dyno tuner, diagnostic technician, repair technician, and more. The couple has two children.
In previous jobs, Keith was reimbursed based on flag times, and Liz was surprised by how dramatically his paychecks could fluctuate in a single calendar year.
During slower periods such as winters, holidays, and the span of Oklahoma’s popular 10- to 11-day state fairs, Keith would call Liz to warn her that he would be bringing less money home than usual. Late springs and summers were typically much more lucrative.
“We learned that we really had to save in better months ahead of those down periods, but those calls were still hard on both of us,” she remembers, noting that she has heard about techs taking on second jobs because they were struggling to top minimum wage.
“After I’d been through that myself, I couldn’t have my own techs worried about being able to feed their families. I don’t want them stressed about being able to pay their bills and wondering if they were going to be eating steak or a bunch of ramen noodles that week.”
Even outside of expected annual downtimes, Liz says she realized from first-hand experience that a technician’s income could drop suddenly if a shop didn’t get enough complex, high-value repair jobs such as rebuilding transmissions or replacing head gaskets and engines.
And certain employees, particularly younger techs, tended to lose out on those jobs to longer-tenured team members.
That left some technicians trying to survive on more low-profit work such as time-consuming warranty jobs or routine maintenance tasks such as oil changes, alignments, and standard brake jobs (although, the counter-argument goes there, a good tech should be able to knock out those latter jobs in a fraction of the hours typically billed).
On the other hand, a difficult diagnostic or repair job could easily exceed flag time and become unprofitable despite a tech’s best efforts, especially if unexpected complications cropped up or a flag time was poorly calculated from the beginning.
Perkins feared that morale would drop quickly for techs without more regularity in their work lives. “I just think that people are going to do their best and stay with us if they have the stability,” she says. “They’re also not feeling pressure to look out for themselves and fight over the ‘better’ jobs, like, ‘He got the engine job last time; when do I get one? What about me?’”
So, she continues: “This way, what we’re incentivizing is teamwork. We’re all working toward one goal, which is to do our best work and get the cars back to customers in a timely manner, but without racing the clock or possibly competing with each other.”
Still, establishing an effective hourly pay system isn’t as easy as simply setting an hourly wage and stepping back, Perkins stresses.
Most important has been scheduling regular staff reviews on all details of the shop’s daily workflow. Those step-by-step plans run from the time of a customer’s initial call through scheduling appointments, collecting information on a vehicle, inspecting the vehicle and diagnosing problems, ordering needed parts, completing and documenting maintenance or repair work, checking customers out, and cleaning up workspaces and outdoor lots.
Everyone has to clearly understand their role in that system, as well the procedures for making adjustments if something threw the schedule off–if, for example, a two-hour allotment for diagnostic work stretched into four hours on a complex case.
“There needs to be guidance in place on questions like, ‘What are the next steps? Who, let’s say, will be in charge of contacting the customer?’” Perkins says. “Everyone has to be held accountable and be on the same page about how to keep things running well. There’s a lot of setup needed to get to that place, but once you get there, everything is easier.”
The shop holds weekly staff meetings on Wednesdays, with a free lunch included, to discuss those issues and any problems, concerns or suggestions that arise. The system requires owners to trust and respect team members, Perkins says, and for techs to reward that regard with consistent hard work.
Level 1 Automotive does regular employee evaluations that can result in hourly raises to recognize experience, quality results, new training and certifications, and/or the acceptance of added shop responsibilities.
All new employees are evaluated after 90 days, six months, and one year, followed by reevaluations that happen at least once a year as long as they stay with the business.
“We have given raises multiple times to one person in a single year before,” Perkins notes. “We love to see people taking initiative and approaching us to ask if they might take on more job roles and tasks, and that can include serving as mentors to newer team members.”
The business did try out a bonus system at one point in the past, she adds, but employees soon reported back that they preferred a higher hourly wage due to its predictability.
In addition, the shop doesn’t only rely on paychecks to help retain technicians. For example, it provides tools, uniforms, and work boots to help technicians avoid going into any debt, especially early in their careers; the company also maintains heated and cooled work spaces year-round and operates on a four-day work week, with 10 hours of labor expected a day.
“A work-life balance has become part of our culture, which I think is happening at more and more shops,” Perkins says. “We need our techs to be happy, enjoy their jobs, and want to please us as owners. If they are, we can be optimistic about our industry’s future.”