The flat rate system is mostly used to pay technicians in automotive dealerships. There are hourly and salary jobs out there, but the majority are flat-rate. The system itself is easy to understand, but depending on the service department, there can be different variations which make it seem more confusing than it actually is. I’m going to explain the basics for anyone who doesn’t know the system, or who have never heard of it.
The name is what it is. As a technician, you get a flat rate per job/ paid by the piece. Each technician has an hourly rate, some higher than others depending on several different factors. There are two different sets of times. Warranty times, and cash/customer pay times. That’s right! For the same exact job, there are two separate times. The times are published by the manufacturer for warranty times, and there are several companies out there who publish the cash/customer pay times. Years ago these times could found in books, but now like everything else, they are found online.
Each job hour is broken down into tenths. A tenth of an hour is six minutes. This is done by dividing 60 minutes by 10. Almost every job has a published time. If I had to put a percentage on it, I’d say about 95% of the time. The other 5%, the times are estimated by the technician doing the work, or the manager. Sometimes it will be straight time. Straight time is whatever time spent doing that job, that is how much time the technician will get paid and the customer will be charged.
I’m going to use a water pump for an example here, and the times are also an example. A customer brings their car in for repair, which is still under warranty. Their concern is a coolant leak. The technician diagnoses the issue and performs the repair. Since this vehicle is under warranty, the labor for the job published by the manufacturer is 1.6 hours (1 hour and 36 minutes). That same job on that same car if it were no longer under the warranty could pay something around 2.8 hours (2 hours and 48 minutes). If the technician’s hourly rate is $20.00 per hour, he/she will make $32 if that job is warranty. If the same job is customer pay/cash, they will make $56. Regardless of how long the job takes the technician, the times, are the times. This can be a great thing, or it can be a horrible thing. If they can do the job in half the time, their hourly rate is technically doubled! Sounds great right? Well, not so great. If the technician takes twice the allotted time, then their hourly rate is technically cut in half! Unfortunately, more times than not, young technicians or tech school students are told about the “unlimited potential to earn”, but not told about the potential to work more hours than they are going to get paid for. The system is based on production. If you don’t produce, you don’t get paid. In other words… If the dealership or service center isn’t making money, either is the technician.
If you read the “about me” section on the home page, you saw I mentioned my first flat-rate job, now I’m going to elaborate on it. I was about 21 years old. I was making $13 per hour. A few months prior, I finished up school and asked for a raise. I got moved from 11$ per hour to $13, but as a flat rate technician which was a win/win for the dealership, and for me… A major loss! In the couple months that I lasted, I was averaging somewhere around 20 hours a week. That was around the same amount of hours I was producing when I was making 11$ per hour. So the only person that got a raise was the dealership. I went from making $11 per hour x’s 40 hours per week to making $13 per hour x’s 20ish hours a week. Do that math! The dealerships hourly rate stayed the same and my hourly rate was almost cut in half. I lasted a total of about 3 months as a flat rate technician. My last week there, I worked 44 hours and produced 11. The following week I accepted a job as an hourly technician at an independent service shop. So I gave the dealership two weeks notice and was fired the next day.
If you are new to the automotive business, I hope you’ve learned a lesson or two from reading this. If you are someone interested in how the flat rate system works, hopefully, you understand the basic concepts behind it now. Last but not least, if you are someone who has experience in the automotive industry, I’m sorry for boring you with a bunch of information that you already know.
Thank you for reading! Feel free to leave any comments, complaints, or suggestions.