Flat rate hours are used to estimate the cost of making a repair to a vehicle. This method has been around since the 1920’s and is used by both independent shops and dealers alike. Recently in the last few years there have been a lot of criticism by both shops and consumers about the use of flat rate times.
How does the flat rate charge work
For any given repair on any vehicle there is a flat rate labor charge associated with that repair. The charge is based on the amount of time it should take to make the repair. When someone calls a shop and asks for a price to do a job the service advisor will use a labor guide to estimate the time to perform the repair.
Flat rate labor guides are available for just about any vehicle. And I do not know of a shop that does not use one. Most of the labor guides out there are based on the manufacturer’s recommendation for repair times. On a newer car, (a car between 10 to 15 years old), they are usually pretty fair to both the shop and the consumer.
Older cars and the flat rate labor guide
Where things can become interesting is when working on older cars. As a vehicle begins to get older multiple systems can begin to fail. This can be made especially worse if the car’s maintenance has not been kept up. This can mean that a simple brake pad job can turn into a major brake overhaul. This makes it harder to estimate a repair on an older vehicle, but not impossible.
Most independent shops today will work on cars that are between 5 and 12 years old. This is because they are old enough to be out of warranty with the selling dealer but not so old that it is time for them to be retired. The flat rate labor guide on these cars will still be a good fit.
How the mechanic gets paid
The flat rate guide is not just for estimating a price to the owner. Most mechanics are paid based on the flat rate labor charge. When a mechanic in a shop is given a job, he/she will know exatly how long it should take, and how much they will be paid for the job. Usually, as an added bonus if the mechanic can finish the job in less time than the flat rate labor guide calls for, they will usually still be paid the entire amount of time.
For example, if a particular job has a book time of 2.5 hours and the mechanic does it in 2.0 hours, he will still get paid 2.5 hours. This is because the shop is being paid 2.5 hours for the job. However, if the mechanic is too slow and the job takes him 3.0 hours, he will still only get paid for 2.5 hours.
Criticizing the Flat rate guide
So, in the last few years there have been serval attacks on the use of the flat rate guide. Some have come from the consumer and some have come from mechanics and shops. Some consumers feel that the flat rate labor guides are ripping them off. They feel that if the mechanic can do the job faster then they should pay less for it.
I understand that the cost of any repair is always a concern for anyone. However just because a mechanic can do the job faster than the book says, why would you want to penalize them for that. Usually when the mechanic is faster it is because he/she is better at their job. They have invested in high quality tools and the training to know how to use them. Often, they have done the same job so many times that they can do it in their sleep. This is the kind of mechanic that I want working on my car.
Sometimes the mechanic will complain that there is not enough time to complete the job. This can be for a lot of reasons. If the shop does not have all the equipment or the information required to perform the repair, then this can be an issue. If the mechanic does not have all of the basic tools required or lacks the proper training it will affect the repair time.
The other issue can be on older cars. Just like I mentioned earlier on an older car a basic job can turn into a major overhaul. Just because a price has been quoted on a specific repair, that does not mean that it cannot change. If when doing a job, the mechanic finds something that is seized or a bolt that is rounded off, does not mean that he has to eat the extra time to repair it.
What should happen is he should notify the service adviser or the customer of the issue. That way the job can be re-quoted and then proceed after getting an approval for the increased cost. This is usually a training issue and in my experience most customers will understand when a job price goes up because of unforeseen issues.
Shop owners tend to complain that mechanics can be pre-Madonna’s when it comes to taking some jobs. A mechanic that struggles with a type of repair is not going to take a job he does not like. Especially if he is not going to get paid as much for doing it compared to a different service. This is my opinion boils down to the shop. If they accept a job knowing what is involved in the repair, then they should already have a mechanic on staff to deal with that type of job. If not, then the shop should not accept the job in the first place.
Another way to deal with the issue is training. If you are going to be doing more of these types of repairs, then you need to get your staff up to speed. Training will benefit both the shop and the mechanic in the long run with both making more money.
The other way to deal with a job that is not easy to do is to charge more for it. The flat rate labor guide is just that, a guide. Just because it says a job should take a certain amount of time that does not mean that you have to stick by it. Take for example 1970 911 engine, the flat rate labor guide on that engine says that it should take 44 hours to overhaul. However, on a 50-year-old engine that has suffered years of neglect and poor repairs, there is just no way to get it done in that time. So why would you charge only 44 hours?
Rushing to get the job done
The other big complaint that some shops and consumers can have is the mechanic rushes to complete a job. In the process he/she makes mistakes or does a poor job. This is a problem, but not with the labor guide or the time allotted for the repair. This kind of issue in my experience comes from just a bad mechanic.
A bad mechanic will try to take short cuts no matter how much he/she is getting paid. Short cuts will rarely lead to a quality job. Often the level of training is also a major issue. The mechanic does not know how to perform the repair correctly. A shop needs to have good quality control protocols and inspect the work that the staff are doing.
One of the draw backs of a mechanic who is paid only on commission is warranty work. If job comes back as a result of a mechanics mistake or bad work, then they should be responsible repair the faulty work. Where the issue comes in is if a part fails and it is not the fault of the mechanic or vehicle owner. The part is usually covered by a warranty, but rarely is any labor covered. This usually leads to the shop and the mechanic taking a hit to repair the issue again.
This is also why the parts used in a repair can make a big difference. Using knock offs or poor quality parts can lead to comebacks. Come backs will cost the shop and mechanic time, money, and lost customer confidence.
Truth in Advertising
Lately I have seen a number of shops saying how bad the flat rate labor guide is for the customer. They advertise that they do not use it and they pay their mechanics in a different method. This is supposed to make the customer feel better that the mechanic is not going to rush to get the job done.
Yet they are not being completely truthful. They may not be using a commercial flat rate labor guide. However, you can be assured that they have their own repair times figured out. There is no way any customer is going to take a vehicle into a shop with out some idea of how much it will cost.
Image how you would feel dropping the car off for service and asking how much will it cost? The answer you get is “I don’t know and well have to let you know after its done”. So, you ask when it will be done and get the answer, “We don’t know, we’ll just call you”. Very few customers would leave a vehicle under those circumstances.
What they are doing is still using a flat labor guide, but it is just their own. If they are a specialist in a particular make, then they are going to have years of data on how long each repair takes. Sure, prices can change due to unforeseen issues but its no different then any other shop.
You can also bet that if a mechanic that is being paid by the hour or on a salary and takes too long to do a job they will hear about from the boss. It also means incorporating some type of bonus system to keep good mechanics otherwise the shop will lose them.
I have worked in shops that pay by the hour, salary, and commission. In my opinion the commission option is really the only way to go. It incentives the mechanic to be better, and have the tools to do the job. Or it at least it did for me. I have hired a lot of mechanics in my time and not all have done well on commission.
Some of the mechanics that I hired were good mechanics with low come back numbers, but they were just slow. I also had others that turned out to not be good mechanics and when working on a commission basis it will show that up very quickly.
All in all, the flat rate labor system when used correctly can be fair to the consumer, the shop, and the mechanic doing the job. Sure, it will have its draw backs for all parties concerned but it works.