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Flat Rate is DEAD as we know it. (Kind of)

One of the most debated subjects in our business is pay plans for Technicians. Some Techs feel like they are getting ripped off by an outdated pay plan while others feel like there is opportunity to put some extra cash in their pocket. Shop Owners and Managers struggle to find the right incentive plan that drives performance, stays competitive in the market place while not driving the shop broke. Based on the feedback we receive from both Shops and Techs, I’d say that we’re getting farther apart from a resolution rather than closer.

Why is this such a source of tension when the market for Techs is getting so tight. There is certainly demand for good Techs and shops have an idea that they are going to have to pay competitively to play in that market. Shops understand that in order to win in the service business, they need to have the best lineup coming to work in their shops each and every day. Flat rate seemingly makes sense for shops because it rewards high performers when busy but protects shops from committing too much to wages during slow periods.

Here is where I feel like we run into issues with this pay rate issue. Each and every person is selfish. This sounds bad but when it comes down to it, we are. I don’t necessarily think that there’s anything bad with this either. We’re naturally built to be on survival mode and part of surviving in the current day and age is to make sure that you’re making enough money to support yourself. Of course, fancy tools and toys cost money as well.

A couple things stick out as hot items for flat rate. The most common complaint that I hear is about the unfair labor times set by manufacturers that don’t allow for a great opportunity for Techs to make a consistently good living. There are a lot of differing opinions on this but the fact that it generates as much debate as it does probably means there’s at least a bit of truth in this. What’s most troublesome to me is that both sides of the table seem to dig their heels in when talking about it. People get really defensive when somebody doesn’t agree with them.

As the market for good Technicians is heating up, we are starting to see other types of compensation plans designed at luring Techs from competing shops. This is where I think the flat rate type of compensation style might be in a little bit of trouble. Techs are starting to get their pick of what compensation plan best suits them and the shops, and manufacturers, that are late to the party in terms of adapting are going to pay a big price. The job market is as transparent as ever and the shops struggling to figure out what will make them competitive will be the ones left behind.

Do I truly think that the flat rate system is going to disappear as a whole? I don’t think that it probably will. With that being said, manufacturers with dealer networks and even independent shops better be sure that their compensation is in line with what the market bears. In my opinion, there have been lots of people in our industry lying to themselves or at least trying to sell themselves on the fact that they might not be paying as competitively as they should.

There’s a general feeling that the leverage has shifted to Technicians. I say it over and over that this isn’t rocket science, it’s basic economics. There is more demand than supply and that’s going to dictate who carries the leverage. I’m not saying that flat rate is going to completely disappear, I’m just saying that it’s time that certain people in our industry come to the table and figure out how this can be tweaked to be beneficial for all parties involved.