History of Flat Rate

Like most of you, I've been wondering where the flat rate pay system came from and how it got this way. As you can expect, the history of how mechanics get paid (before we were more correctly referred to as technicians) goes back to the very beginnings of the automobile. Vehicle owners, if they weren't particularly wealthy, had to get creative to fix their own cars or get help from someone in another trade, most times even making their own parts. Wealthy car owners employed drivers that doubled as the vehicle's mechanic who could leverage their knowledge of the vehicle to negotiate wages and employment.

By the 1920's, mass production of cars and trucks had really kicked off, leading to standardization of parts and thus, repairs. This allowed the automobile repair industry to blossom. Vehicle dealerships and independent shops were popping up everywhere and at first, mechanics were paid for their time and repairs were billed for how long they took. The shops that had faster mechanics did better as they could complete repairs quicker and thus cheaper for customers.

The Great Depression hit in the late 1920's and mechanics couldn't dodge the effects. By this time it was pretty standard for shops to pay their mechanics 50% of the door rate, meaning if they charged $10 per labor hour, the shop got $5 and the mechanic got $5 (!!!). That meant that if there were no cars to fix, the mechanic did not get paid (sound familiar?). The auto repair industry did not get the same protections that other industries at the time could provide for workers due to unionization. Unionization for mechanics was difficult as the auto repair industry was fragmented into smaller companies, like independent shops and family owned dealerships, rather than large corporations.

The end of the 40's and early 50's saw massive economic growth and the flat rate system started to take off. Employers quickly learned how to abuse the system to maximize profits at the expense of their employees. Unfortunately that lead to mechanics taking shortcuts and selling services that weren't needed, leading to the widespread, and false, belief that we're "thiefs."

Manufacturers benefitted greatly as they could set the labor times for a certain repair to avoid having to cover for their own vehicle's shortcomings. If a certain repair would take the average technician 1 hour to complete, nothing stops the manufacturer from saying that the repair takes 0.2 hours (12 minutes) to complete. What makes matters worse is that there are a seemingly endless amount of things that the automotive technician has to do throughout the day that will either slow down the repair process or will be things that are simply not paid for. Whether it be waiting for approval on a repair, looking for special tools, finding keys to a vehicle (or finding the vehicle itself), and correcting parts personnel errors are just a few of the most common, time consuming things that technicians have to deal with that do not contribute to the paycheck. Service advisors can make the job more difficult by simply being lazy and not quoting a job correctly, or under selling a job so the customer is more likely to approve the work (the technician, of course, is the only one who ends up suffering).

There are reports lately that manufacturers are simply not paying for diagnostic work or are denying claims on warranty tickets for diagnostic time. Anyone who has tried to figure a problem on a car (or anything mechanical) knows that the diagnosis can sometimes even take longer than the repair itself. While there certainly are cases, especially in a dealership setting where you're seeing the same cars over and over again, that there are certain problems in certain vehicles that are common enough to know what the repair is very quickly, but the experienced tech knows that "shotgunning" the repair can result in costly come backs.

With the ever growing complexity of vehicles, technicians are having to learn these new systems instantly, usually with just a 1 hour training video explaining how it works. Technicians are increasingly becoming IT personnel as well as the many other things they have to be experts in to fix modern vehicles.

EV's and PHEV's have brought new challenges to the workshop by adding a fun new challenge: the danger of instant death. While EV techs are trained to properly deal with high voltage systems, there is no differential in pay to make it worth it the risk of dealing with up to 800 volts of electricity.

There is a growing movement of technicians fighting to make the changes necessary for technicians to be compensated fairly for warranty repairs. There has to be an independent regulatory body that helps determine how much a repair should pay in flat rate units. Until then, technicians will continue to pay for the vehicle defects, whether it be from engineering or manufacture of the vehicles. Dealers will continue to find new ways to take advantage of technicians as they are starting to suffer from the increase in online sales and people simply having "their buddy" fix the car, usually from watching a Youtube video detailing the fix (whether it be from a reliable source or not).

While the flat rate system does work out for a lot of techs, it is designed to promote upsells and it saves the employer from having to pay their people when business is slow. There are systems in place that good shops employ to keep their people paid, such as hybrid pay and even having a guarantee. Incentive programs can help boost a paycheck but only work when cars are coming in the door. A lot of techs move on to work in hourly shops with good benefits for stability. In the end, it comes down to personal preference.