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How to Convert an Hourly Tech to Performance-Based Pay

Shop Management

Bob Cooper

by Bob Cooper , President

By Bob Cooper

There are many advantages to having your technicians on a performance-based pay program (flat rate, bonuses based on productivity, etc.), rather than a fixed hourly rate. Unfortunately, many shop owners are afraid to take the leap and convert to these performance-based programs. Although there are many reasons why these shop owners are hesitant, the most common reason we hear at Elite is that they feel their techs are accustomed to receiving a predictable amount in their paycheck every week, and if they were to even remotely suggest a change in pay, they would run the risk of losing those techs. If you are one of those shop owners that has been hesitant to convert your techs to performance-based pay in the past, then this article is perfect for you.

The first thing you need to do is review all of your past repair orders (ideally for the last three months) and find what each of your technicians has been generating in labor sales each week. You will also need to go back as far as six months to identify their best weeks in labor sales. You will be looking for two things: the average weekly labor sales for each of your technicians over the reviewed period, and their three best weeks in labor sales. As soon as you have finished, take your calculator and do a little more math to determine what each tech would have earned over the last three months if they had been on a performance-based pay program, and secondly, how much they would have earned if they had been on a performance-based pay plan during their most productive weeks.

Next, meet with each employee and show them the numbers. Compare what they actually earned to what they would have earned over the past 3 months if they would have been on a performance-based program. Now here’s where it gets really good. Show them what they would have earned during their three most productive weeks “if” they would have been on a performance-based program. The bottom line is this: You have to show them in clear, concrete numbers that their past performance proves that they can earn a lot more on your new pay program by simply being more productive.

Lastly, you should always allow your employees to transition into any new pay plan, so here’s an easy way to do it: Tell your technicians that over the next three months you will provide them with the hourly rate they have been on as a guarantee against the income they earn on your new performance-based pay plan. To put it another way, they will have the best of both worlds in that they will be able earn more by being more productive, but for three months they will still have the hourly rate guarantee in place for peace of mind. After that, you can convert that hourly guarantee to a simple guarantee of billable hours.

For additional help implementing new systems and processes in your shop, learn how you can team up with one of the top shop owners in America through the Elite Coaching Program.

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