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Home Ask the Expert Should We Switch to Paying Our Appraisers Commission?

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We have three vehicle damage appraisers and are thinking of switching
to a commission system to pay them. Do you have any advice on how to
implement that? And what is the going rate for completed and repaired
vehicles? Also, do you know if this system causes customer service to
take a hit? We want to know if any shops have had problems with
estimators (who see the job all the way through) trying to cut the

Moving estimators to a commission pay plan makes
good sense for a collision repair facility. There is not a “standard”
commission structure. Generally, commission estimators are paid a
percentage of their total sales or a percentage of their gross profit. Other pay plans are available, such as payment of a commission on only
parts and labor sales, graduated commission scales or a salary plus
commission pay plan. Also, a “CSI component” may be included in any pay plan.

assume you have three estimators who each sell $100,000 per month at a
40 percent gross profit. Total sales would be $300,000 per month, or $3.6 million
annually with a gross profit of $120,000 per month or $1.4 million
annually. Let’s also assume that the estimators are being paid an
annual salary of $60,000, or $5,000 per month.

Moving to a
commission system, you generally do not want to reduce pay. Using the
numbers above, with estimators currently earning $5,000 on $100,000 of
sales, a 5 percent commission on total sales would maintain the current pay
with the added incentive to earn more by increasing sales. You could
use the same math to come up with a commission on gross profit.

Warnings: Pay commission only on closed ROs with insurance-approved
supplements. This avoids the issue of having to “take back” commissions
paid on supplements that are not paid in full by the insurer.  Rushing
at the last day of the pay period to close ROs on non-delivered work
can be an issue. Adopt the rule that the RO cannot be closed until the
customer has accepted the repaired vehicle. Be sure that your system
conforms to your state labor laws, particularly with respect to minimum
wage and overtime.

Salary plus commission is an alternative and a
good way to move to commission. Let’s use our sample numbers of a $5,000
salary on $100,000 in sales. You could set a base salary of $3,000 per
month and pay 2 percent commission on total sales. The pay will still be
$5,000 per month with the incentive to increase sales to improve

Let’s say you want to improve estimate accuracy,
maintain CSI and move toward a commission pay plan.  Perhaps a base plus
commission plus incentive plan would work? Base pay of $3,000 per month plus
2 percent of parts and labor sales. Also, 2 percent of paint and materials will be added
when paint and materials is greater than 10 percent of total sales. Plus, a CSI component of $500
per month will be paid if the overall CSI is 97.5 percent.

A “graduated” plan pays an increasing percentage based on sales. An estimator may make 5 percent of sales up to $110,000, but can earn 6 percent on sales above $110,000.

with your CPA or controller to arrive at a plan that will provide an
incentive to improve sales, maintain profitability…and remain legal! Avoid trust issues by keeping the plan simple and easy for all to

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Hank Nunn

Hank Nunn

Hank Nunn is a 35-year collision industry veteran. He can be reached at [email protected]
  • Todd

    I’ve been in the collision industry for the better part of 3 decades and myself and colleagues at other locations were recently switched from nonexempt hourly based on salary, to 100% commission on closed RO’s, with small incentives for CSI and LOR. I can tell you from my personal experience this has been a sickening, stressful change that has sucked the life out of me, negatively effected my job performance and customer service. I’ve found myself to be untrusting of my company and apathetic towards my job.

    The reason is simple: A collision damage estimator is traditionally a salary or hourly role because of the primary job duties. Its certainly NOT a sales position, but is more of a quasi customer service – administrative – production role. Paying an estimator based on their skills and experience, ability to maintain profits, adhere to direct repair partner guidelines and be a multi-functional team player are key components in the success of the shop and the estimator’s career.

    The estimator does way more functional tasks than they do “selling” which is more conducive to commission positions. The other obvious contradictions are that the commission estimator is hindered or has capped income potential due to the shop’s productive capacity, unlike selling say cell phones, refrigerators, cars, software, etc.

    Its also a conflict of interest for shop’s that perform direct repair for insurance carriers, since the entire objective of those agreements is to have repairs done as cheaply as possible, a.k.a. as “cost effective”. By contrast, a commission estimator should be able to write fat sheets, with new OEM parts and plenty of labor. Being paid on closed on repair orders is poor too, because the severity and efficiency of repairs is completely out of their control. Add to that being in a shop with DRP’s and free customer pay estimates and an estimator ends up working at least 50% of their time in non-income revenue activities such as total losses, drive-in inspections, and the majority of customer pay estimates that are for information only. Then there are all the phone calls to be answered, aging accounts receivables follow-ups, reconciling files, final billing, delivering cars, taking payments, customer status updates, meetings, training, etc.

    Cutting out overtime makes the matter worse, as the estimator works long hours simply as a convenience to customers. There are a lot of estimators who put up with all this hard work because they make decent money and are willing to put up with all the chaos and crazy policy changes, personnel changes, etc. because they normally can count on a regular pay check regardless – however that same estimator on commission only, finds themselves in a hopeless situation wasting most of their time not “making” money. And when the shop sucks up all of its WIP for EOM, it short changes the estimator’s first pay check in the first pay period. Bottom line, in my opinion, based on my experience with the switch – commission estimators are the worst possible idea for a body shop and will certainly effect the entire shop. The estimator role is the glue that holds the shop together – without an estimator you might as well close up shop. A shop can survive without a lot of things and can run just fine without a manager, a parts manager, a production manager, etc. Commission estimator? Worst idea ever.