There is a Fair Flat Rate System

December 29, 2003 by
Filed under: Uncategorized 

This article appeared in the February 2002 issue of Bodyshop Business

It seems not a week goes by without me reading about some shop owner paying his painter an astronomical salary. I read it on the discussion boards, in the trade magazines and hear about it through the auto body grapevine. At first I thought it was just some urban legend cooked up by underpaid techs trying to justify their woes. But some of the sources are getting more and more credible.

Just stop and think a minute about this. The painter, who may be very skilled, has a limited number of needed skills to do his job well. On the other hand, think about all the skills your metal techs need to do their jobs well. I?m in no way trying to lessen the value or the importance of our painters. They are just as vital to our success as anyone else in our shops. I am trying, however, to put things into perspective. For those of you shop owners and managers who are paying your painters more than your metal techs or worse yet, yourselves, this is a merely a wakeup call. You may need to consider a more equitable method of distributing your labor dollars.

I ran into the problem of fair compensation in my flat rate shop several years ago. I had just taken over as manager of a small shop in a dealership. The shop had only three techs, each who did everything from start to finish. Their work was excellent, some of the best quality I had seen, but quantity was something else. The shop had a month backlog and plenty of space. We needed a fourth tech desperately, but there was no way I could hire another combination tech, someone to do a repair from start to finish. Three guys working out of one spray booth was the maximum. So I decided to take that great big step toward modernization and hire a full time painter.

OK, sounds like a good idea, but how do you break up the labor and pay everyone fairly? Oh, by the way, anyone in this position, needing to convert from all combination techs to the more departmentalized system of a metal shop and a paint shop should be prepared for Armageddon. Collision techs aren?t generally the easily adaptable sort. And you might as well ask them all to get a sex change, than tell them that someone else will now be painting all their work, and getting a good chunk of their labor hours to do it.

I couldn?t even consider hiring a painter until I learned from someone how to split up the labor between the painter and my other techs. Ah, the wonders of the flat rate system. I started calling everyone I could think of who might be able to help me. I called other bodyshop owners and managers. I visited a few other shops that were gracious enough to let me take a look at how they did it. I harassed my paint supplier every time I saw him, trying to enlist him in my mission. I surfed the Internet and surveyed the discussion boards. I got so many different answers and opinions, yet none seemed fair. Some shops gave all the paint time to the painter. Some gave 20% of the paint time to the metal techs because the metal techs did their own priming and finish sanding. Others had secret formulas and gimmicks.

I was desperate. I hired a painter and tried several of the systems other shops were using hoping one of them would work out. Two of my techs quit, my new painter turned out to be psychotic, I fired my new painter, hired another painter, hired a prepper to clean and mask the cars for the new painter, the new painter enlightened me on what a real psychotic was, I fired the new painter, stuck a spray gun in my new prepper?s hand, told him to make me proud, hired a new prepper, hired back the two techs who had quit and began therapy. A pretty dang smooth transition if I say so myself.

After plenty of school and hands-on training, my prepper turned out to be a great painter. And after plenty of mistakes and lots of aggravation, I finally came up with a flat rate system that I, and my employees, think is fair. Not only is it fair, but also it is simple and promotes teamwork among all my employees. Quality has improved, efficiency is up, profits are up and employee moral is the best it?s been. We have continued to grow and prosper, and my technicians continue to work together to come up with more efficient ways of doing things. The technicians who work the hardest make the most money. Distribution of labor hours is equitable, based on what the technician has actually invested in any given repair. My system is open, honest and most importantly, the technicians trust it because they can see with their own eyes how it works.

Here?s how the system works

As I mentioned above, the distribution of labor hours is equitable and based on what each technician actually has invested in each repair. One caveat: All your techs must be proficient at their particular job. If you have a tech who is not proficient, pay him hourly until he can contribute positively to the repair process of each vehicle. You can still use this system with an hourly tech in the repair process.

The best way to illustrate this system is with an example. And if this seems complicated, don?t worry, you can download a free calculator I developed from my website.

Let?s say we have a repair that pays a total of 40 hours. The repair could have 30 hours metal labor and 10 hours paint labor, it doesn?t matter. With this system, it is all the same, 40 hours of labor. Here?s how the repair turned out:

? The metal tech contributed 20 hours to the repair.
? The prepper worked on the car for 1.5 hours
? The painter spent 2.5 hours painting the car.
? The detailer worked on the car for 2 hours

This gives us a total of 26 hours invested in this repair. If we divide this figure into the 40 hours we were allowed, we get an efficiency of 154%. Now if we used one of the traditional methods of distributing labor we?d have do decide what is paint labor and what is not. The prepper?s labor would probably fall under the paint category, but what about the detailer?s labor? Does that get charged to the paint department, the metal department, or is it shared somehow?

In this example, let?s give the advantage to the metal technician and say that the detailer?s work is charged to the paint labor. If we add the prepper?s labor, the painter?s labor and the detailer?s labor together we get a total of 6 hours charged to the paint department. The repair paid 10 hours of paint time. If we divide the 6 hours of actual time worked into the 10 hours we got paid we get an efficiency of 167%. Did the prepper, the painter and the detailer work any harder or faster that the metal tech? How do we justify giving them a bigger piece of the pie?

The metal tech spent 20 hours of the 30 hours allotted in this repair, giving him a 150% efficiency. Did he work less hard or less efficient than the guys in the paint department? What if every one of the techs involved in this repair did their best and performed proficiently? How do we justify paying our paint department a larger percentage of the labor dollars? Why do we let the three database providers determine how we distribute labor hours and compensate our employees? How do we get our employees to think and work like a team if we favor one department over another?

Dividing the labor up using this method looks like this. The metal tech gets a total of 30 hours (all the metal labor), the prepper gets 2.5 hours (1.5 x 167%), the painter gets 4.2 hours (2.5 x 167%), and the detailer gets 3.3 hours ( 2 x 167%).

If your shop is departmentalized, every repair that goes through it is a team effort. And if you want your employees to work more like a team you need to compensate them as a team.

Let?s take another look at the above example, and use a more equitable method of distributing the labor hours. Remember, there were a total of 40 hours paid for this repair and we had an overall efficiency of 154%.

? The metal tech contributed 20 hours to the repair.
? The prepper worked on the car for 1.5 hours
? The painter spent 2.5 hours painting the car.
? The detailer worked on the car for 2 hours

If we treat this repair as the team effort it really was we would pay every tech involved in the repair based on the overall efficiency, and based on what each team member contributed to, or invested in the repair. So the metal tech gets 154% of the 20 hours he had into the repair for a total of 30.8 hours. The prepper gets 154% of 1.5 hours he worked or 2.3 hours, the painter gets 154% of 2.5 hours for a total of 3.8 hours, and the detailer gets 154% of 2 hours or 3.1 hours. What could be more fair unless someone screwed up their part of the effort?

What do you do if you have an hourly tech working in this process? Let?s say your detailer is paid hourly. You use your detailer to also clean up the shop and run errands, etc. How does he fit in this system? You definitely want to track his time. If you?re running a flat rate shop, even your hourly techs should be punching on and off any vehicle they work on. You have to bill out their labor to be profitable. To accurately determine the repairs overall efficiency, and then fairly divide up the labor hours among the flat rate techs simply include the hourly tech in the equation. You can either keep the extra time the hourly tech would have coming and apply it toward the shop?s gross profit, or you can do like I do, to make my compensation package more competitive with other shops in the area, and divide the hourly tech?s extra time among the remaining flat rate techs.

For instance, let?s say we use the above example again and this time we treat the detailer as an hourly employee. The detailer?s additional 1.1 hours could go directly to the shop?s gross profit, or could be evenly distributed to the other techs based on their contribution to the repair. This calculation can get complicated, but my calculator does it automatically.

The key to this system, and helping techs understand and trust it, is efficiency percentage. Techs must understand the dynamics of efficiency. While a paint technician may only get an hour or so extra time on each repair, he is working on many more cars during the course of a week than a metal tech is. What is important is his efficiency. The tech must focus on that figure and not the actual amount of extra hours he gets for each repair. They must understand that if they earn $14 per flat rate hour, and they have an average efficiency of 150%, they are actually earning $21 for every hour they work.

So how can a system like this promote teamwork, increase efficiency and improve employee moral? Let me give you a couple of examples. When I first got this system figured out and running, a couple of my techs, who thought they were real clever, tried to outsmart the system or manipulate it in their favor. But no matter what they tried they just ended up hurting themselves.

For instance, one of my metal techs thought that if he passed off work to the next tech in line, (in my shop, that would be my prepper) work that he himself should be doing, he would increase his efficiency and make more money. But all he did was decrease the efficiency of the entire repair, thus decreased his own efficiency since he was part of a team effort. My prepper did do the work the metal tech was supposed to do, but it took him much longer to do because he wasn?t as skilled as my metal tech. It took a while for the metal tech to figure this out, and now he doesn?t try to pass off his work to someone else.

The same metal tech started to get a little sloppy because he knew the prepper was trained to fix any minor defects in the metal tech?s work. But this also ate up precious time in the repair. Eventually the metal tech understood that to maximize his earnings, he had to do everything expected of him, and do it carefully, because if someone else had to carry his slack, it was coming out of his own pocket by hurting the overall repair efficiency. And it would cost everyone else money, which wouldn?t make him a very popular guy.

My painter tried two different ways to get a larger share of the pie. At first he started punching off a repair before he was actually done working on it. He would actually punch off the clock completely, or punch on to W-time (clean up time). Sure, he increased the actual repair efficiency, but because he had fewer hours into the repair, he didn?t get his fair share of the additional labor distribution. When this didn?t work for him, he tried staying punched on a job longer than necessary. All he did then was to hurt the overall repair efficiency, which cost him money and some unhappy co-workers.

All my techs soon learned that keeping a meticulous and honest timecard was essential to maximizing their earnings. They understood that there was no way to beat my system. Every car was leaving repaired properly. Redoes cost everyone dearly.

My techs also learned to work together. If my metal techs see that the paint department is getting jammed up, and they have a few extra minutes, they?ll actually ask my painter if he?d like them to finish sand and wash the car before sending it to the paint department. And if the painter has some spare time, he?ll jump in and help the metal techs. The metal techs and the painter now confer with each other about how things should be done. They?ve figured out that they rely on each other to make a living. No more passing the buck because they just hurt themselves.

As far as employee moral, it?s never been better. My system is open, it?s honest, and my calculator provides a visual tool should my techs have any questions or feel something isn?t fair. I?ve used it to show them different scenarios. One of my techs felt he didn?t make enough on a particular job. I showed him that nobody did. It was just one of those repairs that didn?t go well. He felt he had really hustled, done a great job and should have done better. Then he suggested that maybe he should start spending more time on each repair because he would get a bigger slice of the pie. I used the calculator to show him what would happen if he did that. He was amazed when he saw he would actually net fewer hours because he would adversely affect the repairs efficiency.

This system is just a tool, and there will be times when I?ll have to override the calculator to be fair. Say, for instance, my painter has a bad day and screws up an otherwise smooth and profitable repair. I?ll have to make some manual adjustments so that I don?t penalize the other techs because of an obvious screw up by my painter. When this happens I make sure I explain to each of the techs involved in that particular repair how I adjusted the labor to make things more fair. This helps to reinforce their trust in the system.

My Flat Rate Calculator is available for download free here on my website.

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Comments

11 Comments on There is a Fair Flat Rate System

  1. Rick Little on Sat, 3rd Jan 2004 12:31 pm
  2. Read your article with interest and would probably try to implement some of your ideas if not for the fact that I also came up with a flat rate system that promotes teamwork. It is similar to yours in some ways but much less complicated. The end result is the same with great attitudes among the employees and a continuing and increasing conciousness of time utilization. I put my plan into effect Feb 1st 2003 and I call it the BONUS/INCENTIVE PROGRAM. Want to hear about it?

  3. Nick on Wed, 18th Feb 2004 5:02 pm
  4. Hey, im a 21 year old prepper/painter somewhat in transition from one to the other at the moment. I like your ideas, you definitely put the emphasis on fairness. That is great, Our business is getting so grimy. But what do you think about using the same system only splitting the body and paint shops. I understand morale is part of this but if its not broke dont fix it. In our shop everyone gets along fine and doesnt try to cut each others throats. But its a family shop also.

  5. todd on Fri, 26th Mar 2004 9:55 pm
  6. hey dump that flat rate old school stuff and go hourly why make a guy bust it to make so called big money all the while lowering your qaulity and the its not my job mentality and never knows from week to week what he will make, even the feild and make every body in the shop hourly and responsible for the jobs leaving even if they have to wash a car it make for a awesome team that tends to push each other and will raise you productivity 50% i promise, i can run 200 hours out of my shop a week and i am slow i mean delivered jobs not flag hours with only 5 guys and one is a apprentice/janitor/porter 7.00 per hour and one is a low tech/helper 9.00 per hour one is a mid tech/needs a little guidence14.00 per hour and two high techs 20.00 per hour which lead the rest do the math

    RESPONSE FROM THE AUTHOR:

    I really do appreciate the comment, but it sounds like you didn’t read the article before you commented. If your shop employs five techs, and you are only producing 200 hours a week, you should definitely go back and read the article closely. 200 hours divided by five technicians is only 40 hours per tech per week. If your techs are only producing 100%, you have a serious problem, unless the insurance companies in your area pay you the same hourly rate as the dealerships charge for mechanical work. I did the math and the numbers don’t look good. Hopefully you calculated improperly. You might want to go back and try it again and then leave another comment with the results.

  7. butch on Fri, 28th Jan 2005 11:19 pm
  8. the problem with this is that in my shop, some guys are WAAAYYY faster than others. if you do it the way that you described, all that does is encourage the fast guys to slow down to the pace of the slow guys. after all, they dont want to constantly be working harder than the slow guy for thier 10 hours worth of the pay. the most efficient way, is the percentage of labor method. let the guys that want to rock and roll, make the money, and let them go home early when they get all thier work done. this is like dangling a carrot in front of thier nose. you will see the productivity SKYROCKET! and there isnt any undue pressure put on anybody. our fast guy turns about 700-1000 dollars worth of labor money in his 10 hours and our slow guy turns in about 200-300. so how can you possibly justify paying these guys the same money for thier 10 actual hours?

  9. Vance on Fri, 31st Jan 2014 5:43 am
  10. Hi
    I am an airbrush artist.
    I am getting hired and paid flat rate in Indiana as a paint/prep Tech.
    What should I request for my wage negotiation?

  11. Frank Hauf on Wed, 30th Sep 2015 8:08 pm
  12. my shop has recently been discussing going on the “TEAM SYSTEM” so I am curious to the pros and cons however As a painter or a bodytech I would expect to be paid flate rate based on a percentage of the labor for instance 40% of $52.00 is $21.00 per labor hour . Now because I have almost 30 yrs exp. if I have a job with 10.0 in labor I know I should be able to finish that job in 5.0 actual hours thats a 200% effeciecny rate , however by your formula I would be penalized by my effeciency? perhaps I missed it in your formula but you mentioned that metal techs have more responsabilities so are your metal techs getting 40% of your frame and mechanical time or are you keeping there flat rate the same and actually paying them 25% of the frame and mechanical and keeping the lions share for yourself ? In addition why would either dept have to pay for the detail work that is a complimentary thing not covered on any estimates other than maybe flood damage ? traditionally the detailer , the administrational fees and other overhead like electricity and water has been paid by the shops cut of the labor years ago we were getting 50% than 45% now its 40% and now it seems shops want to cut it more in the name of effeciency . you also mentioned that your techs were making more than your managers . well shouldnt they be ? after all when you go visit your doctor who makes more money the lady in the front office that schedules the appointments and takes your payment or the doctor who actually knows how to fix you ?

  13. Mario espejo on Mon, 26th Oct 2015 7:48 pm
  14. How much a painter get paid on flat rate

  15. Mario espejo on Thu, 7th Jan 2016 5:09 pm
  16. Working on flat rate you still have salary or not

  17. Jay Durand on Tue, 19th Apr 2016 10:08 pm
  18. I like your idea, the only problem would be having a tech slow down but usually among good experienced techs the attitude is I am the man and I will show you how much work I can put out. I have been a tech for almost twenty years, starting when I was 16 as a detailer. I am currently working my last week because of the greed in the industry. I am prepping and finishing (cutting and buffing) priming, taping, cleaning the booths and prep stations in between cars and for good measure keeping the guns clean and ready. Before I came to the shop four techs had a high of 280 hours. We hit a little over 300 last period with just myself and a painter and I earned… 610.00. I am not even making a third of the painters commission even though I have to paint when we are behind. It’s a corporate shop and the manager is too spineless to step in which had been done on my behalf at a family shop. In my opinion if you are an experienced, fast and quality conscious pepper finisher you should be making 33.3-40% with a bonus if goals are exceeded. I am going to miss being in a shop but I have had enough of watching prima Donna painters get rich off of my work. The ONLY way I would ever consider going back in the industry is a system such as yours. Did I mention that I am ICAR certified, provide my own buffer, sander, Iwata guns and skip breaks and lunch to meet quota and still make around 12 bucks an hour. Wow.

  19. beau on Wed, 15th Mar 2017 7:31 pm
  20. Standard flat rate has worked for how long now? Forever! Don’t mess with what works. Over in my state body techs and painters get the same or very close to the same rate. Flat rate is only for fast techs with lots of experience, it’s motivation to work harder so you make more. Fast hard working techs get rewarded with more work than the slow ones. I’ve been a body tech and a painter and that’s how almost all shops divide work out. Personally I think body techs should get a higher rate because look at the thousands we have to buy in tools, painters need 2 to 3 spray guns, that’s it. Painters don’t have to write supplements or check parts ect.

  21. Manny prado on Sun, 31st Mar 2019 7:00 am
  22. I’m glad I don’t have a manager like this at my shop I would quit

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