A forum member writes:
“I know there are a lot of discussions about incentive-based play plans. I want to go away from flat rates, but I don't want to pay salary because I'm afraid my techs' productivity with drop. I've got two good techs I want to keep, so I want to pay them fairly. Can I get some examples of an incentive-based plan explained simply that work for all parties?”
Tom Ham responds:
“Here is a simple system that can be used as a foundation and then adjusted to your liking. Let's say salary would be $1,000 per week—take half of that. Let's say the flat rate is $24 per hour—take half of that. Pay for the week is $500 salary plus $12 per hour for every flat-rate hour produced.”
Another forum member replies:
“If your tech produces 50 hours per week at $24 per hour his gross is $1,200. Using this plan, the tech would have to bill 58 hours per week to stay even. Flat-rate is like capitalism—it's not perfect, but it's the best we have.”
Another forum member writes:
“How about a blended system? Assume what the technician normally makes is $1,000 per week. In North Carolina, we are required to punch a time clock anyway for insurance. Pay 40 hours based on, say, 60 percent of his $1,000. Figure the bonus on his remaining 40 percent to get the desired result and keep them motivated. You can play with the number infinitely. I made it match my budgeting and manage how many hours they are at work. Also, when the shop needs to be cleaned or inventory stocked they are still getting paid.
“I switched my guys from a salary type pay to this in February, and my production initially came up 70 percent. It has leveled off a little, but all of my techs are averaging billing 40-50 percent more hours than they billed last year.”
The questions and responses are posted on the Automotive Management Network website, which is operated by Deb and Tom Ham, owners of Auto Centric (formerly Ham's Automotive) in Grand Rapids, Mich. The comments have been edited for clarity and brevity.