Commission Versus Flat Rate

The age old question…Do I get a percentage of what I turn or are you paying me on a per unit turned?  The answer to either question is yes.  Confusing huh?  In a commission pay system you, the technician, should receive a percentage of the labor you turn at the rate given by the insurance company for the work you’ve done.  An example would be insurance company “A” pays $40.00, per body labor hour and insurance company “B” pays $42.00 per body labor hour.  Under a commission pay system like ours, where you, the technician, would receive 50% of the labor turned, you would receive $41.00, for one hour of labor from each insurance company.  Being paid in a flat rate system would give the technician less money because the “flat rate” would not change if the dollar per hour changed.  See the chart below. 

When is the difference most noticed by the technician? During a labor rate change.    When labor rates change, technicians want their piece of the pie to remain constant.  Therefore, they want “their rate” to be raised.  Most shops do not raise the  flat rate until all insurance companies are paying the new labor rate.  For the shop, this decision makes them more money on a per unit basis during the time the rates begin to change up until the point they make the “flat rate” amount change.  In a commission pay system, the technician always gets the benefit of higher rates.  Conner Brothers operates both pay systems.  For questions or comments click here.

Commission Pay System                   

                                 Rate                               Pay given to
                    Hours    per     Total        Total    Commission   
Company  Worked    Hour    Pay         Rate     Technician
                   
                   
     A                 1            40         40           50%         20
                   
     B                 1             42        42           50%         21
                   

                                                 Total Payment           41
                   
                   

Flat Rate System                   

                  
                      Hours    Rate per    Flat Rate       Given to
Company    Worked    Hour             Pay            Technician
                   
                   
     A                   1              40              20                  20
                   
     B                   1              42              20                  20
                   

                                                Total Payment          $40