Auto Repair Shop Owners: Which Pay Plan is Better?
Pay Plans by Rick White, President 180BIZ (Estimated Read Time 4 minutes 34 seconds)
In this episode, I will talk about pay plans. I’ve heard for years about this age-old battle about flat rate, hourly, and salary wages while wondering which is best. So let's take the mystery out of it once and for all.
Salary, first of all, is probably illegal for technicians. They don't qualify for salary because they are available for overtime. So salary is not an option, especially if they're working overtime. You can do salary with overtime and that works, but you must allow for overtime if they're working over 40 hours a week, or eight hours a day in some states. That’s all I have to say about salary.
Now, let's talk about flat rate vs. hourly wages and which one is the best pay plan. I will be honest with you. Flat rate pay has been an easy way to manage technicians. It took the management of technicians and even your straight commission with your advisors away from you, the owner, and the leader, and puts it on the pay plan. Sure, that makes it easy for you. But the reality is two things happen.
- It doesn't always get better.
- You don't learn how to become a better leader.
But is flat rate bad? No. If I was going back to being a technician or an advisor, I would want to be on commission or flat rate because I know what I can do. It's not inherently a bad pay plan. What is bad is the old way of thinking where a shop has one pay plan or pay structure for each position and that's it. One size fits all.
That is the problem with pay plans today. You're not playing a chess game when it comes to owning and running a business today. Your players don't all move the same way. Your team is motivated by different things, different goals, different dreams, and different fears. You need to be cognizant of what those are and then build a pay plan that matches what works for them.
So, does hourly work? Absolutely. Does flat rate work? Absolutely, for the right people. If you have a real go-getter tech and he wants flat rate, give it to him or her. If you have an advisor that wants more hourly than anything else, give it to them. But here's what I want you to understand. The industry, in general, is using the pay plan to manage people because they didn't do a good job of it. We didn't do a good job of communicating.
When you hire someone, they ask, “How much will I get paid? When do I get paid? How many weeks do I get off?” But as owners, we're so excited to get someone into the shop and alleviate some of the stress that we don’t do a great job of talking about what your side of that agreement is.
For any pay plan to work, it needs clear communication on what goals and expectations are going to be. You can have clear communication on goals and expectations for each position. And then once you get that done right, once you get that in place and they have agreed to it, it's simply providing feedback and helping them get better. It’s helping them achieve the goals that you're setting for them and making sure you're getting at least the expectation. This is critical.
It all comes down to you knowing what you need from each position. It's knowing what key indicators you will use as benchmarks, what your goals are and what your minimum levels or expectations are. Then share them with your potential team member and get them to agree that they can do it and perform at that level. It’s about giving them the opportunity, and the chance to succeed, as well as being a resource to help them grow.
We are an industry that hires people for what they can do, and we fire them for who they are. It’s best to be super clear on the kind of person you need in that position first. Then look for the skill. But we tend to do the opposite. We hire skillset and find the person is toxic to the shop. One of the hardest things you'll ever do in your business is fire a toxic top performer. That's a tough thing to do. But that's where you put your money where your mouth is. That's where you know the rubber meets the road.
How important is the environment for your team? When you can show them that you’re willing to let go of someone because they're not a good fit, that’s when it makes a huge difference. It doesn't mean they're a bad person, they're just not a good fit in your environment.
So, pay plan is simply figuring out what works best for them that the shop can afford. Getting that across, getting the goals, expectations, and feedback model to them so that they understand pay plans, which one's the best one, whatever one they want, as long as you clearly define your goals and expectations. Put a feedback model in place so that everyone understands the ruler. They must understand how they are being measured. That’s what will make managing and leading easier.
I just want to wish you all a great week. I want you to have fun. I want you to be safe and you know what else? I want you to create some abundance. God bless and take care.
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