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Best Practices in Technician Pay Plans

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Dec 2017 Service Insight

Ken Hines makes it a priority to keep his dealerships’ technicians happy. As a result, the fixed operations director and service manager at Reynolds Ford of Norman in the Oklahoma City area hasn’t had a technician leave his facilities in the last decade.

Much of that is due to the fact that Hines utilizes technician pay plans that establish productivity and efficiency goals, incentivize employees, are tailored to individuals, and allow for flexibility.

“We take care of technicians,” notes Hines, a veteran of nearly 40 years in the industry. “And they take great care of us.”

The fixed ops director—who oversees two dealerships with service departments that combine to gross roughly $17 million annually—also feels it’s important to be fair to both your dealership and the technician when a choosing pay plan.

“That’s one of the fundamental covenants of a pay plan: It’s got to be good for both parties,” Hines notes. “It’s imperative that you have high-quality leadership that’s fair with the technician as well as the customer.”

Hines, who has used multiple pay plans during his lengthy career, notes the positives and negatives of the industry’s main methods of technician compensation.   


Team System

Plusses: In a large shop, a team pay plan, in which groups of employees pool their skillsets to benefit one another, has its merits. Hines notes that, in theory, inexperienced technicians could work under the watchful eye of A- and B-techs, and receive guidance.

Minuses: The downside to team plans, he says, is, “from a technician standpoint, they’re splitting hours. So, your A- and B-techs are producing the majority of the work and splitting with a C- and D-tech.”

Also, he notes, “if you’ve got a weak advisor that’s just an order taker, or doesn’t have good sales skills, that team’s going to struggle, because [the advisors are] just not writing the same quality or volume of work.”


Hourly Pay

Plusses: Hourly technician pay plans—which are typically used for inexperienced, unproven staffers—can work well for those who largely perform light-repair work, Hines says. On the other hand …

Minuses: “No skilled technician would ever want to work on a straight hourly pay plan,” he says. “I mean, those guys are race horses, and they want that carrot out there; that’s part of what makes them great technicians in most cases.”


Basic Salary

Plusses: A straight salary pay plan can help keep technicians from feeling rushed while making repairs. That can result in work that’s above reproach.  

Minuses: Hines, whose employer used a salary-based pay plan for three years a while back, found that technicians can lack motivation with this setup.

“We just took what technicians had averaged, bi-weekly, for the previous three years, and said, ‘We’re going to guarantee you this many hours,’” Hines recalls. “But there wasn’t a carrot on the other end of the stick.

“It was very, very difficult for us to even attract technicians to apply for jobs. … You’ll get some guys that are below-average technicians. But you’ll find out real quick that they’re costing you money, and you’re paying them more than they’re producing.”


Commission Based

Plusses: In Hines’ experience, pay plans that are commission based and flat rate (which compensate workers based on the completion of jobs) typically inspire technicians to work as efficiently as possible, with an eye toward increased paychecks.

After all, it’s of utmost importance that “you cycle that work through the shop in a timely manner,” Hines says, “both from a profitability standpoint and from a customer satisfaction standpoint.”

Minuses: It’s possible that technicians might feel rushed while working on a plan that implores them to be as productive as possible.


Hybrid System

Plusses: In theory, a hybrid pay plan could mesh some of the best elements of multiple setups. That was Hines’ thinking, years ago, when his facilities started using a compensation setup that paid technicians a base salary plus commision.

Minuses: “The production increased a bit,” Hines recalls, “but it’s amazing: When we went back on straight commission, the production went up. Our ‘fix-it-right’ is like 92, 93 percent, year in and year out.”

Ultimately, he feels it’s important to utilize a pay plan that inspires technicians to work hard and appreciate their employer.

“It’s imperative,” Hines says, “that you understand, as a manager, what your technicians are dealing with and that you acknowledge the hard work and dedication that they put in.”

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