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Hourly Rate vs Flat Rate: How Auto Mechanics Are Paid

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Auto technicians may get paid a variety of ways. Two of the most popular forms of auto mechanic payment are flat rate and hourly rate.

There’s a debate about which rate is better for mechanic work: flat or hourly. It helps to know the pros and cons of each when you’re considering auto technician jobs.

What works for you will depend on the level of stability and security you crave, how competent and experienced you are, and what type of work style you have. Learn about the advantages and disadvantages of hourly rate pay and flat rate pay as you’re considering employers to work for.

What is Hourly Rate Pay?

Hourly rate pay is a salary based on the number of hours worked.

An employee has an hourly rate, say $20/hour. When scheduled to work 40 hours in a week, he or she can expect 40 x $20 = $800 for that week. 

What is Flat Rate Pay?

Flat rate pay is payment based on each job that’s completed. An employer or manufacturer estimates the amount of time a job should take. The employer pays the technician a predetermined amount for that job, based on the expected time.

For example, say the flat rate of a job is based on two hours. If the employee takes one hour to complete the job, he or she will be paid for two hours’ worth of work. If the technician takes three hours, the rate still is based on two hours.

Flat rate may also be called “book time.” The times that are set for each job may be based on a variety of factors. These could include the average time it takes for that shop to complete similar jobs, how long a manufacturer says a warranty repair should take or the industry standards that employers look at when they’re determining flat rates.

Typically, most automotive businesses charge flat fees to customers for most jobs. A mechanic paid a flat rate gets a percentage of the flat fee charge.

The Advantages of Hourly Rate Pay

Hourly pay is predictable, which is appealing to technicians who have others relying on them for income. With hourly pay based on a certain number of hours a week, you know the amount of money you earn each pay period is going to be the same.

Another advantage to hourly rate pay is that auto technician jobs can be unpredictable. Complex diagnoses can take extra time. Some jobs may be misestimated because unexpected issues pop up. If a job estimated to take one hour to complete ends up taking three hours, the technician on hourly rate pay will be fully compensated for all three hours of work.

In some cases, hourly rate pay may increase the quality of work. Technicians can take the time needed to be thorough without worrying about rushing against the clock.

If you like working methodically, an hourly system may be a better fit compared to a flat rate system. And if you enjoy solving complex auto problems, flat rate might not be for you.

Some employers will combine hourly pay with rewards for above-average productivity. That way, technicians have a set expectation for a salary but they may also earn more by completing more work.

The Disadvantages of Hourly Rate Pay

With hourly rate pay, the amount of money you can make in a pay period is limited. If you’re highly efficient and complete more jobs than other technicians, you’re still going to be paid the same amount of hours, regardless of how productive you are.

Another potential disadvantage of hourly rate pay is it may create a technician culture not as focused or driven. Compared to a flat rate pay system, hourly rate pay may not motivate technicians to produce as much work.

The Advantages of Flat Rate Pay

A flat rate pay system can be a great fit for highly motivated and productive technicians who work in busy shops. As work comes in, flat rate technicians can complete and take on more work. Technicians may work just 40 hours in a shop but may be compensated double or triple what their hourly rate payment would have been.

A flat rate pay system can be highly motivating for technicians to finish as many jobs as possible, which benefits employers. If you can complete jobs quickly and accurately, you may have the potential to greatly increase your income in a flat rate shop.

For the shop, an advantage to a flat rate pay system is that they don’t have to overpay slower mechanics. Another advantage of flat rate pay for shops is that the shop can use average flat rates for jobs to estimate its income.

Flat rate work can also motivate technicians to stay focused on the task at hand, instead of wasting time on non-work activities. Shops don’t have to pay for things like socializing. A flat rate system also can increase the motivation to upsell so more jobs come into the shop.

The Disadvantages of Flat Rate Pay

A disadvantage of a flat rate pay system for technicians is its unpredictability. If a shop is slow and jobs aren’t coming in, a paycheck won’t be as steady. If you’re waiting on parts to get the job done, that can also stall flat rate work.

Plus, some jobs may take much longer than the initially estimated time. Technicians won’t be paid for the extra time it takes to complete the work. Some employers do offer a base salary guarantee in case issues like these pop up.

For an employer, flat rate pay may mean that employees rush through work, which can create sloppy jobs. Employers will need to closely monitor work to make sure it’s completed satisfactorily to avoid repeat visits. Another disadvantage of flat rate systems for employers is that mechanics who take longer to complete a job can cause a job to be under priced.

In a flat rate system, newer mechanics may take longer on jobs and may be paid less overall than if they were in an hourly rate pay system. For technicians who have extensive experience and certifications, the value of flat rate pay may also be lower than what they might earn in an hourly rate pay system.

Another disadvantage of flat rate pay is the estimated time of warranty repairs (discussed below). Manufacturers determine the estimated times, which typically are less valuable than the work shops will estimate for similar flat rate jobs.

Another disadvantage to a flat rate system is there may be less focus on mentoring young technicians or providing customer service because technicians are concentrating on completing their jobs and moving on to new work.

How Do Flat Rate Employees Get Paid for Non-Repair Work?

Besides their assigned jobs, flat rate employees do other work, like cleaning. It’s up to the employee and the employer to be in agreement ahead of time on how they’ll be compensated for work like that.

A flat rate technician employment policy outlines how projects are compensated. The shop may decide that extra work like cleaning is included in the preset flat rates or the work may be separately compensated. An employment policy should clearly define how the shop pays flat rate technicians for all the work they’ll be doing, including non-repair work.

Can Flat Rate Employees Earn Overtime?

According to the U.S. Department of Labor, employees covered by the Fair Labor Standards Act are entitled to receive overtime pay when an employer requires or permits an employee to work overtime in excess of 40 hours in a workweek.

Flat rate employees will need to discuss overtime with their employer to determine if they’re allowed to work overtime. If they are and they do, they are entitled to receive 1½ times the regular rate of pay. It’s up to the employer to explain whether technicians are entitled to overtime and, if so, how overtime is calculated so the employees know exactly what to expect.

Warranty Repairs

Warranty repair flat rates are usually set by the manufacturer and are typically less than what flat rate employees are paid for comparable shop repairs. The manufacturer estimates how much time a job should take, which often results in less pay for a flat employee.

For technicians who will be doing a lot of warranty repair work, that should be a consideration regarding whether flat rate or hourly rate pay makes more financial sense.

Related Question

How much do automotive service technicians make?

In May 2019, the median annual wage for automotive service technicians and mechanics was $42,090, the U.S. Bureau of Labor Statistics reports.25

Get Employment Assistance from Universal Technical Institute

Flat rate or hourly rate? Independent shop or big dealership? These are the types of employment questions Universal Technical Institute’s (UTI) Employment Assistance specialists are here to help answer. Our team provides guidance to students and graduates who want to find meaningful careers in the auto technician industry.

We’re here for any questions you have. Call (800) 834-7308 or contact us online.

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