Labor Rate Simplification

[Randy Lucyk]

By simplify, I suspect you mean highly configured, so that labor charges are calculated is such a way as to be profitable, across a variety of services. I have begun the configuration process and it is described in the video at the link below. I believe there is more that can done to dial in gross profit dollars per hour of tech time, automatically, without any additional service advisor work.  Some/many of us have low profit jobs that drag down our high profit job, and I am working to counter act this.

I am going plant the seed at Rowriter that I would like to be able to matrix additional “time”, as well as dollars, by service category.

https://1drv.ms/v/s!Ap7ibKYluQaehPVs1xX9G-3PP6xFUA?e=8tu4Au

 

[Kerry Moncur]

Not sure what is complex to begin with regarding labor rate. We charge the same labor rate x job time. If, during our inspection, we see aggravating factors such as rust, broken fasteners, or anything else that will make the job more difficult, the job time goes up accordingly. One caveat to this is on packaged items such as oil changes when the cost of the filter or amount of oil will cause the labor rate to flucuate in order to make the package pricing consistant.

[Maylan Newton]

I think we do have tendencies to make some things complex. The 1st thing I want to say is to make sure your base or lowest hourly rate is determined by your true actual cost of doing business. You should not be concerned with what anybody else is charging; your rate needs to be based on what your true actual cost is.

one of the concepts we teach in our Service Advisors School is you should have multiple labor rates, and I am an advocate of approximately 5 different labor rates. This allows you to be more competitive on the less complex, less difficult, and higher comeback jobs but charge more for the complex or the difficult to do jobs. Most labor rate guides, please remember it is only a guide, and it is wrong in many, many cases. Most guides Actually have a skill level attached to labor operation, typically A, B, or C. If you are using the computer system for your time, this skill level option that may be turned off.

Base labor rate determined by your cost of doing business this is for your normal service work, and some of the most common jobs we do basic brake jobs, oil services, timing belts, water pumps. In the labor guide, these would be classified as C jobs.

2nd labor rate is 10% higher than your base rate is for doing more complex repairs typically listed in your labor guide as the B class jobs. For example, of this would be higher-tech, repairs intake manifold and late-model vehicle, ABS brakes system repairs virtually every repair done in a computer-controlled vehicle.

3rd labor rate is for the diagnosis, inspection, and some of the repairs on any computer-controlled, pneumatically controlled, hydraulically controlled system. This labor rate should be a minimum of 20% higher than your base rate, if not more. This rate helps offset the extra pay for the qualified technician, tools and equipment they need, and the information they need to repair the car correctly. All of which the shop pays for.

The 4th labor rate I have is for larger trucks three-quarter-ton or above. These are just more difficult to work on take up more space, so I charge a little more for them.

My 5th labor rate would be for things like Chassis work on motorhomes, trailers, etc., and if you do coachwork (inside the motorhome), I would have a sixth-rate for that work.

Just clearly define what each labor rate would be used for and implement a policy for this. The 2nd thing that I did consistently was I took whatever book time was increased it by 20% before I applied to multiple labor rate to it. I found this worked very well. Also, some of your computer systems will automatically increase the hours listed in your computer system for that 20% bump; make sure you use your computerized information and repair order systems to their maximum.

Not as simple as some of us would like, but unfortunately today’s complex vehicles require us to have a slightly less complex method of getting paid properly.

The good thing about multiple labor rates is you can do some of the lower skill level jobs at a more competitive rate, but when you tackle that high-tech drivability complaint it has been all over town, you get a little more labor for your effort to have the training, the tools and the knowledge to fix the car.

I think 1 of our industry’s largest problems is we do not get paid for the knowledge we have, just for using our hands! And that needs to change.

Whatever you decide to do, make sure this policy is in writing, so the employees are very clear about the shop’s pricing structure. It will take a very short time before it becomes 2nd nature and you will reap the benefits.

The most important thing about labor rates is to make sure they all start with the base rate being calculated by your actual cost of doing business, not a fictitious/number. Then add to that base rate based upon the skill level required; my examples above are just that examples in fact maybe you should consider them to be minimums.

I welcome your comments if you like to reach out directly to me to talk about this, I’m always available. Remember we need to get paid for what we know, not what we do!

Maylan Newton maylan@esiseminars.com

[Richard Zaagman]

Simplified our labor rate/s?   I wasn’t aware of that being a need.  Our rates are not that complicated.  We have several rates.  Euro, Asian/Domestic, Specialty Vehicle and Customer Supplied Parts.  Our current software allows us to set different rates based on the things I mentioned.  Too bad the software we are switching to doesn’t offer that option.  We will not have to return to setting various rates which can mean forgetting often.  Software should help eliminate the forgetfulness. I guess that’s a whole different topic though.