How Flat Rate works and why I don’t believe it’s good for the Subaru owner or any car owner for that matter.
In today’s auto repair industry there is a pay system that has been around since the dealers broke the Auto Mechanics Union in the late 1970’s. It’s called the “Flat Rate pay system”. Pay used to be based on hourly wages back in the day of the union shop. Once the union was broken major changes ensued. The auto dealers were free to come up with numerous ways of boosting their profits which included coming up with a new, more profitable pay structure for their technicians called “Flat Rate” pay.
Based on the immediate profit increase a dealer realized by changing to flat rate, word spread and most dealers switched to this new system. There were some hold outs and the independents took their time but eventually most followed. It incentivized technician productivity which meant more profit for the company. It rewarded those that could work fast and produce more work so long as the work was there. If the shop was slow, the dealer didn’t loose money paying for labor that was standing around. Also, a dealer no longer had to pay overtime with this system.
In the past, if a mechanic worked 8 hours he was paid for 8 hours of work no matter how much or how little he accomplished in a day. His individual pay per hour was based on his years of experience, ability, training, proficiency etc.
The new system now based a technicians pay on how many “flat rate” hours he could produce in a day.
A book of suggested repair times called a “flat rate guide” or “labor guide” is a book that has every conceivable repair listed and the time it should take an “average” mechanic to complete the job. Every single item on your Subaru has a repair time associated with it. There are numerous publications that provide these flat rate guides, and many shops have their own in-house flat rate guide.
Here’s an example of how it would work with a front brake job on a Subaru. The brake job has a suggested time of 2.2 flat rate hours. You (the customer) are charged 2.2 hours labor at the shop’s labor rate. When the technician completes the job he is paid 2.2 hours at his own labor rate. Here’s the kicker, he gets paid 2.2 hours whether it takes him only 1 hour to do the job or 3 hours to do the job. As you can imagine, there is now incentive for him to get the job done as fast as possible so they can move on to their next job. If he did 8 Subaru brake jobs in a day here’s how it breaks down:
8 brake jobs x 2.2 hours = 17.6 hrs.
That’s right, the technician gets paid for 17.6 hours times his individual pay (which can range from $15-30 per hour or more). I’ve worked with technicians that could bill 15-20 hours or more in a single day.
On the flip side, if there is a difficult job that takes longer than the flat rate book suggests, the technician is still only paid the flat rate amount.
Example: A water pump replacement on a Subaru pays 4 hours. Let’s say the technician had trouble with some rusty bolts, trouble burping the cooling system etc. The job actually took him 6 hours to do. Guess who looses? You’re right, not the dealer. The dealer will only have to pay the technician 4 hours to do that job. Another thing to keep in mind is that with this system the dealer ONLY pays the technician flat rate pay if he produces work. If it’s a slow work day the technician stands around waiting for a job, it doesn’t cost the dealer any labor time until he’s given a car to work on.
Now… here’s how I believe flat rate can have a negative effect on repair quality and morale in a company. Quality: In an effort to produce more work in less time, technicians create “short cuts” which may save time but sacrifice quality. Some of the short cuts are truly acceptable innovative ways of doing the job faster. Some unfortunately are leaving out items that would have benefited your Subaru in the long run just so they can get the job done quicker and move on to the next one. Morale: Instead of operating as a team that whose goal is to produce the best quality work, the technicians become individuals that are somewhat pitted against each other to see who can get the most work done. Quality technicians that take their time to make sure the job is done right to the best of their ability are often out-earned by “Flat Raters” or technicians whose main goal is quantity, not quality. This creates resentment. I’ve seen top producing “Flat Raters” get a light hand slap in a from a service manager in a situation that would have been termination for another employee.
After all this rambling I still believe that there are plenty of technicians that are flat rate but still have the pride and integrity to do the job right no matter what carrot is dangled in front of them. I tip my hat to them. On the other hand, I’ve seen firsthand what greed can do to an otherwise honest person when they are faced with the same situation.
As for Smart Service, we’re not flat rate. We could be but we would rather have the peace of mind knowing that our staff makes their decisions based on what’s best for you and your Subaru, not how many billable hours of labor they can produce in a day. It also allows us to be unified with one goal, to provide you the customer with the best Subaru care, and customer service while we provide the best possible working environment for our team.
p.s. another subject… most dealerships pay their service advisors based on commission. Ours are salary!