Technician Compensation — How to Stay Competitive



By Jeff Morgan

Fitting a tire dealership has never been an easy task. You need to keep a skilled workforce from a limited number of skilled people. This problem has been around for many years, but lately it has become even more difficult.

The wage pressure and the fight for talent are not only hitting us from within the industry, but they are also coming from other places like never before. The need to find and train the right people is a high priority. However, if we are to attract and keep these people, we must be prepared to compensate them.

There are different compensation plans that are used today. Being creative in finding new ways to reward production and quality is even more important than ever. Paying a normal hourly wage just won’t give you what you want and need, nor will you be able to be truly competitive in today’s “wage wars”.

Before I get into different types of compensation plans, I feel the need to focus on the technicians you train and provide with new skills.

Over the course of my career, I have seen one of two things happen too often. First, many dealerships refuse to train their staff because they fear that these employees will use these skills for the competition. What’s worse: training someone and losing them or keeping untrained and unskilled workers? In this market, you cannot survive if you do not develop your people.

Second, we often don’t pay techs for the new skill level they’re at. And we are slow to give them a raise to pay them what someone with those skills would earn in the open market. Too often we try to save a dollar or two here and there. Granted, if you invest in their development they’re generally less likely to leave, but only if you pay them fairly for what they can do. And the cost of trying to hire someone new to fill those shoes will likely be much higher than what you should be paying for them right now anyway!

Now that we understand the need to pay people appropriately for what they can do, let’s discuss ways to do it. As I mentioned earlier, paying a normal hourly wage will not really be competitive anymore. In addition, you do not encourage your technicians to work to their maximum capacity.

The flat rate is a good program for the best producers, but there is always the fear that the average producer is afraid of an inconsistent paycheck and the possibility of bad weeks.

One solution that can help here is the implementation of a hybrid between the two programs. In this compensation plan, the technician has a basic hourly rate. This is what they get paid for the hours they work, including overtime. Then they get an additional rate on top of the flag hours produced.

Let me give you an example. Instead of paying a technician $ 26 per flag hour, they get maybe $ 18 per clock hour and $ 8 per flag hour produced. This not only protects them during the off-peak weeks, but also provides them with a strong incentive to maximize their productivity.

Let’s say in this example that the technician logs 40 hours and scores 35 hours. His salary for that week would be $ 1,000 ($ 720 on the meter and $ 280 for flag hours.) If you paid the technician for the flag hours directly, his salary would be $ 910. What if this technician had logged 40 and reported 50? In this case, his salary would be $ 1,120. Granted, the technician would earn more in a matter of hours, but for technicians who still falter on 100% productivity, this provides a more consistent pay, while also inspiring them to do more.

Also keep in mind that the money generated for flag hours should also be taken into account for the calculation of the effective rate if overtime is involved in the calculation of the overtime rate.

You can also use a program like this to encourage technicians to increase their skills. You can add dollars to the production of Flag Hour, depending on learning new skills or achieving certain certifications. In the previous example, you might be able to add $ 2 to the flag hour output, raising it to $ 10, if they get their refrigerant certifications to work on air conditioning systems.

Another possibility would be to add $ 1 to this number based on ASE certifications. The choice is yours, but the idea is to give employees a tangible reason to improve their skills and abilities.

This same concept can be used with your tire technicians or lubrication technicians. They would have a lower base hourly rate, but you could add an incentive for the hours billed. Maybe after completing a 30 day orientation period, they start getting $ 2 per billed hour. Then, if they complete various training programs, such as industry e-learning modules, additional money may be added. The same basic principle applies here: As they develop their skills, they increase their pay.

Another possible compensation program to consider is giving technicians a bonus based on the performance of your entire business. It would be in addition to their core curriculum. The goal of a program like this is to foster a sense of urgency and teamwork to get the job done. Technicians are more likely to help each other get jobs done accurately and efficiently.

The easiest way to do this bonus program is to base it on the sales dollars collected. However, you can do this on the gross profit dollars collected, if you prefer. The idea is that a pool of bonus dollars is created to be shared. For example, let’s say you make $ 35,000 in sales every week. If you create a bonus pool based on 2.5% of sales per week, the bonus pool for that week is $ 875. You can choose whatever calculation you want to determine the pool amount, but just make sure the calculation method remains consistent.

You also have a choice of how to distribute this bonus pool. One option is to distribute the bonus evenly among all technicians in your workshop. Another is to divide it based on hours worked or hours billed. In other words, the technicians who worked the most hours or who produced the most billable hours will get a bigger slice of the pie.

A third option is to divide the bonus according to technician level. For example, if you have eight techs, your top tech gets 25% of the pool. The next two technicians will get 20 percent. The junior technician gets 15 percent. And tire and lubricant technicians each get 10 percent.

Regardless of what you base the bonus pool on or how you want to distribute, I recommend that your schedule be based on a weekly basis. While I realize it does create a bit more work, the idea of ​​doing that weekly bonus keeps it in mind for your techs and it makes it more impactful. The more immediate the reward, the more likely your technicians will work to impact it, which is the ultimate goal. Again, don’t forget to include these earnings in the calculations of the effective overtime rate, if that should matter.

There are four main elements you should design in your technician compensation programs. First, is it fair and equitable in the market? Otherwise, you will have a constant revolving door of technicians coming and going. It costs your business a lot more than paying more up front. You will also likely settle for less than what your business needs in terms of skills.

Second, the program should allow your technicians to earn more as they become more productive. This puts their salary in their hands and allows them to earn what they are worth. As they earn more, the business earns more. This is what you want. And it will keep your business healthy and your technicians happy.

Third, you need to make sure that your technicians fully understand how they are paid. Too many people only see dollars per hour and not the whole package. They need to understand the various factors that can affect their income. And you have to help show them how to maximize what they earn. Help them understand that their financial success equals your success, so you want them to excel.

Finally, you have to remain a businessman. This means that you still have to manage your business payroll. It has been suggested that the total payroll for a single location should not exceed 45 percent of gross profit. This includes site sales and management, as well as technicians.

It also means that you have to find a good balance. Being more production-based in compensation will certainly help. And finding the right balance also means you need to control overtime spending.

However, the most important thing you need to do is make sure that you are collecting what you are worth in sales. Don’t be afraid to increase your labor rate if necessary. Review the prices of your plans and make any necessary adjustments. Make sure you collect the proper margins on your parts and tires.

The success of your business depends on the experience your customers receive. It is a direct reflection of the people within your business. It is essential to make sure that you attract and keep the right people doing the right things. Your compensation plans are part of this equation. Make sure you give this as much attention as you would any other part of your business. The better you are at retaining your top employees, the better for the long-term health and continued success of your dealership.

To learn more about Hankook, click here.

Tire industry veteran Jeff Morgan is the executive director of TEN (Training and Education Network), including the DSP (Dealer Strategic Planning) 20 Group. He can be reached at [email protected] or 651.846.9871. For more information, see 20DSP.com.

This article is part of MTD Tire Dealer Survival Guide Series. As more articles are published they can be found below:


Previous Lancaster Catholic's Jack Novis Claims District 3 Class 2A Golf Title | Golf in high school
Next Singapore Tertiary Exam Cheaters Pay Others for Homework, Parenting & Education News & Top Stories

No Comment

Leave a reply

Your email address will not be published.