The flat rate system for paying service technicians was controversial when it began nearly 100 years ago. Dealership owners, managers and technicians still argue about whether it is fair and the best way to compensate employees who maintain and repair vehicles.
Under flat rate, a dealership service department assigns standard "book" times to repair and maintenance jobs. Technicians earn a set amount for each job, based on their hourly pay, regardless of how long it takes, as opposed to getting paid for the time they actually spend to complete the job.
A recent survey of 35,000 dealership technicians by automotive consulting firm Carlisle and Co. found that the flat rate system is a prime reason for job dissatisfaction among techs and a key motivator for them to consider leaving dealership shops for other fields. Among the beefs technicians have with flat rate is that their pay depends on the volume and type of work that comes into the shop, and whether they can finish jobs in less than the book times.
Yet the survey concluded that service departments in nearly three out of four franchised new-vehicle dealerships continue to use flat rate. Its supporters assert there is a good reason the system remains so popular: They say it incentivizes technicians to work harder and flag more billable hours, increasing their paychecks while boosting revenue for the shop.
"Technicians are racehorses, for the most part," says Ken Hines, fixed operations director at Reynolds Ford of Oklahoma City and Reynolds Ford of Norman in Oklahoma, which use flat rate. "They want that carrot out in front of them, and they're built to produce billable labor.
"In our case, and at most dealerships, they're exceptionally good at it," Hines told Fixed Ops Journal. "They understand that when they come to work every day, if they're not turning a wrench they're not making any money."
Hines says he has experimented with other pay systems, such as straight salary or salary plus commission. But for the past several years, he notes, his technicians have been on a flat rate plan with a performance bonus, and that has yielded the highest productivity.