Rex Weaver is the service director for Allentown, Pa.-based Rothrock Motors, a Nissan, Chrysler, Jeep and Lotus dealer. He spoke to Aftermarket Business World about his department's fixed-job rate for employee compensation.
Why did you start using this fixed-job-rate approach for service advisor and technician compensation?
As vehicles became better and warranty work at the dealership accounted for fewer of the total dollars at the end of the month, we became more maintenance based. When warranty work went away, because of the need to be competitive with the aftermarket and lower cost dealer groups, it became not very lucrative to have A technicians doing those maintenance level repairs.
How does it work?
There is a high end and low end to it. The pitch to the dealer principal is that the hourly technician rate no longer applies. What applies is an hourly rate attached to each labor operation. So if an oil and filter change is $10 per hour, then maintenance items like brake jobs could be $15 an hour, and you'd pay $20 per hour for the top-end repairs.
At the top end, if you have entry-level employees going through an apprenticeship, they could benefit. If they are doing a warranty job or something like that, they could make $25 an hour. With an apprenticeship, it could be years before they got to that rate.
The traditional warranty gross profitability is 77 percent, according to the NADA [National Automobile Dealers Association] average. Under this plan, it may drop to 74 percent, because you're paying all the technicians the top end rate for those jobs. But between the amount of work we do that is warranty versus maintenance, we're only losing 3 percent of the gross on 10 percent of the money. At the other end, 90 percent of the work we do are things like oil and filter changes, and the gross goes up to 30 percent on those items because you're paying a lower labor rate. You gain on the majority of the total money coming in.
Is this more in line with how other industries pay employees?
If someone installs a carpet at my house, I don't ask the hourly rate. I look at the total job costs. Nobody wants to be muddled with these varying hourly rates anymore. We're trying to get the automotive industry to catch up with its demographic.
How do you pitch this to the technicians?
You're B, C, and D technicians are going to find this lucrative, because everything increases for them. The expectation then is that you take he highest rate for the A technicians, and you go a dollar or two higher for the top rate. That only affects 10 percent of the work. If you have a top guy who is at $20 per hour, you can pay him $25 and still be at 75 percent gross profit for a $100 an hour job. And it eliminates the juggling people do to get their dollar compensation up at the end of the week.
Are there any challenges to instituting this type of plan?
It mostly depends on what dealer management system you are on. For the dealership, it's easy to turn a switch and have all the warranty work be at a certain rate, and it's easy to have certain labor operations be at a lower rate. It's all the in-between ones that become laborious to change.
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