Auto Mechanic Labor Rate Guide Ontario

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Average Pay Auto body repair technicians received a mean $21.94 per hour or $45,630 per year as of May 2017, according to the Bureau of Labor Statistics. The top 10% of auto body repair techs earn. Our mechanic, however, is very experienced and is paid $30 per flag hour. Under these facts, the pay for this mechanic for the day is $30.00 x 7 (flag hours) = $210.00. Since he is working 8 hours, his effective hourly rate is $26.25 an hour (calculated as $210.00 / 8 actual hours)—well above the required minimum. Flat-rate labor is applied to labor guides. A certain amount of time is involved on replacing a car starter on a certain year, make and model vehicle. If the labor guide dictates it takes 2.3 hours to replace the starter, then the customer pays for the new starter, plus the 2.3 hours of labor to install it. Flat Rate Auto Repair Manual – Ms. Ellis Labor guides come in both book and software form and are easy to use. Go home and tell your family that flat rate auto repair manual and see how it makes you feel. The mechanic will make a given wage per flat rate hour. There is not really a flat rate time for diagnosis in most cases.

Flat Rate Pay Can Influence Perception and Performance
By Tom Dwyer

One of the major differences between Tom Dwyer Automotive Services and many other auto repair businesses is the fact that we do not rely on Flat-Rate Compensation for our Technicians. It may not sound significant, but I think it is and I think you should know why. Good income is a critical part of a job, but it’s not the only component in a satisfying career.

Technician’s wages increased in the 80’s and 90’s as vehicles became much more technologically challenging. Technicians now needed more than basic electronics and mechanical knowledge; they needed to master the concepts of computer control for each manufacturer’s vehicle. The repair industry faced a workforce challenge; finding and maintaining the technicians required to take care of these techno-mobiles. How do new technicians move from the understanding of a lawnmower engine (the basics) to the level of ability to diagnose intermittent, no code, computer control drivability problems (a serious modern challenge)? The industry experienced a major downsizing as technicians unable to keep up with the rapidly changing vehicles dropped out. Goober doesn’t work at the fillin’ station anymore (no disrespect intended to Goober). Automotive technicians currently rank at the top of the charts for technically challenging careers; equipment, knowledge and synthesis intensive. Wages increased as the pool of skilled professionals dwindled. The vehicles became more expensive and packed with the latest electronic wizardry. There had been a serious shortage of technicians in general, and now especially of those that could quickly and accurately sort out the problems with these pre-OBD II (on board diagnostics first generation 1989 thru 1996) computer control nightmare cars. Shops performing technical repair still battle to keep the best of the best on board. “Unless all you do as a shop is basic maintenance, no real repair of any depth; then the skilled people that have the knowledge are required.”

When I say “technician” I’m referring to experienced professionals that perform multi-carline, broad range, mechanical and technical services. Professional technician’s expect and deserve good compensation for the demanding work they do. Technicians can be compensated in many ways; you will find hourly, salary, and commission based pay systems or combinations of them out there. “Flat-Rate” is a very common form of commission based compensation. I hate Flat-Rate! I don’t like the unintended consequences of Flat-Rate compensation. Production-based pay plays a part in the mindset of the Flat-Rate technician, affects the work being done and brings problems to the work environment.

Flat-Rate compensation has been around since before I started turning wrenches in 1975 and seemed to be the most common form of compensation. It is very common for auto dealerships, retail chain service providers, independent facilities and others to pay their technicians Flat-Rate compensation. The system is designed to compensate technicians for the completion of specific labor or technical operations, piece by piece, to build a paycheck. Normally the operations are coded alpha / numerically and there may be little or no description, just a code or category number. Each operation is tracked with the corresponding “book time” used for calculating technician compensation. The estimated times used to calculate Flat-Rate pay are listed in labor estimate data bases like Mitchell, AllData, and Chilton. It’s funny that the term “book time” is still used when the book has long faded away in favor of the computer data base estimates.

Flat Rate technicians are paid using labor guide time estimates not the physical time they’ve invested. Labor guide-driven pay systems may benefit the consumer by providing the data for good estimates and some potential price cap effect, but that’s not my point. My point is not based on the financial fairness of the system but the negative effects that Flat-Rate pay can have on the technician’s job perceptions, responsibilities and performance. Flat-Rate compensation can influence technician motivation, working speed, attention to detail, distractibility, and overall sense of responsibility to client and vehicle. Flat-Rate technicians are, after all, being paid to perform very specific labor operations; they are not being paid for sidetrack details. The Flat-Rate technician is paid for the completion of specific labor operations; PERIOD. The labor guide may dictate that a given alternator replacement requires 1.9 hours to perform. This time estimate will be used for technician wage calculation whether it actually takes the technician .9 hours or 2.9 hours; the mission is clear and the field of vision understandably shrinks. The quick completion of individual labor operations becomes a focus, potentially at some sacrifice for the broader concept of taking care of someone’s vehicle. Craftsmanship and attention to detail are not rewarded by Flat-Rate compensation. Exactly the opposite effect is reinforced; speed becomes the basis for reward. There are technicians that can work successfully while being paid Flat-Rate but they are the exception.

Flat-Rate pay issues are intensified in businesses with narrow areas of service coverage like tire and brake stores or chain store retailers where their specialization removes responsibility for complete vehicle care. They may not feel responsible to help the client make good, prioritized decisions based on the knowledge of the condition of the whole vehicle. When you work in a business that doesn’t do timing belt replacements, timing belts are not considered; they don’t factor into any decisions that are made for sales recommendations. Timing belts can be very expensive, extremely expensive when they fail; before a budget is blown on things that can wait it’s best to have the complete list needing consideration presented.

I have jokingly said before: “when you’re a left-side of the car, specialized car shop; you can hardly be responsible for any of those pesky right-side details and how they relate to the integrated function of the vehicle can you?” Same for a technician; when you‘re being paid on Flat-Rate to perform a brake job, understandably you are not going to take time, unpaid, for other work; you need to draw the line somewhere! It is not the Flat-Rate technician’s responsibility or concern that work is being performed on a vehicle that is economically totaled; the rolling illusion. (My term “the rolling illusion” describes the vehicle that is being driven despite its dilapidated and potentially unsafe state. The cost to perform a list of needed services and repairs outweighs the value of the vehicle.)

Flat rate makes sense to the numbers crunchers and has been used forever, it’s great for businesses; overhead and cost of labor floats with business demand level. You don’t pay a flat rate technician whilst he is idle. In fact you can have excess work force; the expense of having two flat rate technicians waiting for work to do is no more expensive for the business than one. When you’re “on Flat Rate” you ebb and flow with the business, “no turn no earn”. Sometimes there is more work than can be done and at other times you’re going home early. There can be slow periods during the year that last for weeks. Flat rate pay competition can cause problems with the staff getting along as well. Competition for the distribution of good paying work can become quite political. These unpredictable pay variables can make it pretty hard on good workers; not the way to keep your best people happy and performing for the long-term.

Good income is an important part of worker satisfaction, but wage is only part of the picture to motivate long term performance and insure a steady competent work force. Everyone prefers to do a good job in a logical context. A professional would not remain happy in an environment that does not provide true value to the client. There is nothing worse than being forced to go thru the motions of an inconsistent, needless or poorly done thing. When things are done right there is a sense of purpose and satisfaction, it’s not just about production; it’s about value, craftsmanship and using expertise to help others. It is critical and technicians enjoy being involved with a comprehensive process; keeping a trained eye on the vehicle, helping determine the sales recommendations and involvement with the records management. Participation in a meaningful process is more fulfilling than fixing something that breaks and just sending a vehicle back out the door till the next thing fails. Technicians not paid by Flat-Rate are more likely to take the time to perform better service.

I believe working in an environment with steady compensation, an honest mission statement and clear job description serves the client best and can help keep staff loyal and happy. Salary or hourly pay helps reinforce the perception that each (complete) vehicle is our responsibility. Thru Industry leading inspections, honest advice, precise estimates, professional guaranteed service, records management, assuming the responsibility for the complete vehicle and making sure the client understands what is needed; we deliver. It is our job to keep our clients informed; what and when it’s time to repair. It is also our job to tell a client when it is time to replace a vehicle and not to repair.

Would you prefer that your automotive service technician be compensated for how fast the work is done or for successful participation in a process with a deeper purpose than just profit?

Like any business, finding the right price is always a challenge. Lots of questions may run through your mind:

Guide

Am I charging too much?

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How do I factor in taxes?

Should I keep up with competition?

Is there a simple equation?

As an owner, you want to give a great value, but to give that value, you need to charge fair wages.

“I used to be the cheap guy in town and I was oblivious to it,” says Tatsu Tsuchida, acting manager of Tokyo Automotive in Placentia, Calif., a seven-employee, 5,000-square-foot, $1-million-per-year business. “Determining the proper labor rate is important to keep up with technology, pay your guys right, make the shop look like a million bucks, and to attract the right customer—and to pay yourself properly.”

The entire 32 years that Evic Svedberg, owner of European Autowerks in Virginia Beach, Va., has been in business, he's always charged what he believes is fair.

“Your labor rate is 50 percent of the equation,” Svedberg says. “When it comes to auto repair, 98 percent of it is labor and parts. If it’s half of the equation and usually 55 percent of sales, then it’s hugely important to have the right number.”

Tsuchida’s current labor rate is $140, while his diagnosis rate is $160. And for Svedberg, his labor rate is set at $129.22.

But how did these shop owners come up with their labor rate? Ratchet+Wrench sat down with the two auto repair shop owners for tips on how they determined their rate while ensuring maximum profitability.

SHOP STATS: Tokyo Automotive Location: Placentia, Calif. Operator: Akio and Tatsu Tsuchida Average Monthly Car Count: 87 Staff Size: 7 Shop Size: 5,000 sq ft. Annual Revenue: $1 million

1. Change your perspective.

Unlike Svedberg, who was never shy about charging what he needs for the job, Tsuchida went through a period of trying to believe in the value of his work and his shop.

Tsuchida says owners not charging enough and being scared to charge more aren't doing enough to warrant the expense. He says those underpriced shop owners are usually the ones content to pay the rent and feed themselves. They likely employ family, college students, and themselves to take advantage of the cheap labor, he says.

“We would balk at how expensive the dealer was, and how they would charge exorbitant prices for services customers didn't need, and we would cut corners because of it,” Tsuchida says. “After a while, we decided that we were shooting ourselves in the foot.”

2. Hold on to your ideal customer.

After recognizing he didn’t charge enough—or what he calls the second step of the “awakening process”—Tsuchida realized that he was scared that raising his labor rate would scare off customers.

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Tsuchida says the frugal customer—which makes up 15–20 percent of the population—is roughly 30–40 percent of a cheap shop’s customer makeup.

“Our shop tanked during this stage, but somehow my parents stuck with my vision, and some of my better customers stayed,” Tsuchida says. “The better customers who stayed were generally the people who would randomly stick an extra $40 on our counter and walk away. Later, when we questioned why, they said, ‘You deserve more.’”

Although a lot of his frugal customers left, some did stay on to support (for more information on filtering out your bad customers and determining your ideal ones, head to ratchetandwrench.com/idealcustomer).

“I learned that if you work with some of them, they responded well,” Tsuchida says. “They might have to break the bigger tickets into two or three visits, but despite their budgets, they would rather have me working on it because they trust no-one else.”

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SHOP STATS: European Autowerks Location: Virginia Beach, Va. Operator: Eric Svedberg Average Monthly Car Count: 200 Staff Size: 7 Shop Size: 6,700 sq ft. Annual Revenue: $2.2 million

3. Do the math.

Svedberg has never used an exact formula when trying to figure out his labor rate. He suggests instead to use a coach to help with rate. With the coach, you will discuss labor rates, the business as it was, if the business is profitable and if the rate needs to be changed.

But how does Svedberg track these numbers to determine this? Each week and each month, Svedberg puts everything about the business into a spreadsheet. This way, owners can see the issues and look at the trends to determine if the labor rate could be adjusted. Any price increase needs to be done through your labor rate, not parts prices, and Svedberg says to make sure to look at your effective labor rate and ensure that labor rate increases aren’t simply being made to make up for a low ELR.

3. Import the underlying factors.

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“Go by the job and have a different labor rate for different things,” Svedberg says.

After you get the right number, owners have to consider other factors that affect this rate. Some important factors include: cars over 10 years old, market competition, cars over 20 years old, classic cars or over 30 years old, lower rate for friends and family, and specialty vehicles, such as motorhomes or Lamborghinis.

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Tsuchida’s general policy for model year 2000 to 2012 vehicles is that his labor rate drops between $125-$140 from his initial cost of $140.

4. Check the competition.

To keep up, Svedberg cold calls dealerships and other auto repair shops to ask what their rates are. However, he suggests being smart with your tactics and using an outside source, as dealerships are getting wise about this tactic.

“Look at the market competition and look at what you work on,” Svedberg says. “Remember, European is usually at a higher rate.”

For Tsuchida, he checks the competition, but it’s not a part of the whole equation.

“Neighboring garages labor rate is a consideration, but not the only criteria,” says Tsuchida. “I don't mind being the more expensive shop, as most of my customers are not the price-conscious variety.”

5. Gage customer reaction.

When you have the right price point figured out, how do you implement it without customers getting upset? Svedberg says he’s never had to explain his rate; he only explains the price by the job and that the auto repair shop expects to make a profit and to make enough money to warrant the job.

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Svedberg also advises a shop should rethink its labor rate every year, usually going up about 1 to 3 percent. And if you find you are really underpriced and need to go up a lot after looking at the numbers, Svedberg says to just increase it all at once—the customer won’t even notice such a change, as long as the job is explained correctly.

Tsuchida doesn’t have a problem raising his labor rate going forward and will adjust the price here and there to where it should be. If customers do make a comment about the price, however, he simply rattles off the benefits of why they do business with them—loaner cars, OEM quality parts, and a promise to not cut corners, for example.

“If they do not understand at that point, they are not likely my ideal customer,” Tsuchida says.