How Do I Implement Flat-Rate Pay at My Shop? - BodyShop Business
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How Do I Implement Flat-Rate Pay at My Shop?

I have just put flat rate into my body shop and I need help on how to pay at different stages of the jobs. As the techs start the job, they would like to pull hours off for the pay week. They think that if they start the job, they should be paid 75 percent of the labor. What should a tech be able to take from the job hours as they’re working on it?

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Hank Nunn is a 35-year collision industry veteran. He is now retired.

I have just put flat rate into my body shop and I need help on how to pay at different stages of the jobs. As the techs start the job, they would like to pull hours off for the pay week. They think that if they start the job, they should be paid 75 percent of the labor. What should a tech be able to take from the job hours as they’re working on it?

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This is one of the many pitfalls of flat rate. As I read your scenario, it sounds like the techs want 75 percent of their time when they start the job. The result is that the tech is grabbing work from the yard, putting a wrench on it, collecting the 75 percent, then the job sits. This also creates a problem when a tech leaves. In that scenario, since most of the repair has already been paid, the shop owner/manager must negotiate with other techs to get it done. Frequently, techs flag time to get paid and get well ahead of the job. 
 
My suggestion would be to pay a percentage to the tech when the job goes to paint, and pay the balance when the RO is closed. Do the same for painters – pay a percentage when the job is returned to reassembly, and the balance when the RO is closed.

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As an industry, it’s common to pay the 75 percent when the job moves to paint or reassembly. Others use a 60-40 split. I favor a 50-50 formula. I also favor making the final payment when the RO is closed, not at vehicle completion. That keeps the focus on getting the cars completed/delivered and the RO closed.
 
Think about it, we want the cars to move through the shop! If we pay most of the labor up front, the focus is on flagging ROs so you can get your 75 percent. Why bother reassembling one when you’re only getting 25 percent?
 
Like many things, there are regional and even local differences in how this is handled. Keep in mind that management systems can be set up to reflect different percentages in flagging ROs.

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