Coach’s Corner: Technician Pay – Working the Numbers to Win the War for Talent
Editor’s Note: The labor rates mentioned in this article are theoretical and should not be considered industry standards.
Are you ready to face the most serious threat to your business? That is, the threat of your shop not having the necessary talent to serve your customers.
All the years of automotive industry leaders’ talk about the technician shortage issue is finally hitting closer to home. For too many shop owners, the concern about such a shortage used to be someone else’s problem. Do you remember thinking, “That won’t happen here. That happens to the other guy”?
Today, though, it’s difficult to find an owner who doesn’t need a technician to fill an opening or isn’t concerned about where the next technician is coming from. Get a group of shop owners together, and I promise you the conversation will quickly turn to the difficulties of finding qualified help.
A few years ago, the war for talent was waged between shops. Talent could be lured from one shop to another for a few dollars more per hour. You don’t see that happening now. Established talent already has found a place where they can enjoy a culture of appreciation, a great work environment and the necessary benefits to live a comfortable life.
To win the war for talent now, your business has to be the better choice. But what will make your business attract the talent you need, the talent you must develop over the next few years so that your business will grow, succeed and secure its future?
Maybe the better question is: What does today’s talent find objectionable about our industry? Poor working conditions? I don’t think so. Work isn’t rewarding? Probably not. Low wages? Yes, that’s it!
It’s time for shop owners to adjust the wages they pay to a level that makes a career in our industry appealing. Shops have suppressed wages for too long, thinking that it would allow them to achieve competitive pricing. But what they failed to recognize is that the lack of talent has had a negative impact on their reputations and, more importantly, on their customers’ experiences.
A quick check of the facts illustrates the problem. In 2015, the median income for a technician was $37,850. But as early as 2012, the average income for 25-34-year-olds was $48,000. Is it any wonder that a young person who has the basic knowledge, skill sets, mechanical aptitude, curiosity and desire chooses a career other than that of an automotive technician?
What if an entry-level technician were paid $20 per hour to bring their talent to your business, instead of $12 per hour to start at the bottom and work their way up? The $20-per-hour salary represents an annual income of $41,600. How long do you think it would take, with an almost $10,000 bump in salary, for your business to become a better choice?
If, at this point, you’re ready to tell me all the problems you’d encounter by paying too much – for example, a lack of production and the cost of an inexperienced technician’s mistakes – I’ve worked through what this wage scale would look like and how it makes sense.
An entry-level technician, earning $20 an hour, could serve as an apprentice and be assigned to an experienced technician who would oversee and teach the young person to minimize mistakes. The mentor’s increased production, due to having an apprentice, would provide additional gross-profit dollars to make up the difference in the apprentice’s pay.
In a shop with a labor rate of, say, $150, a gross labor profit of 70 percent and a gross parts profit of 60 percent, a 10 percent increase in production would cover the apprentice’s hourly wage. The investment for the shop then becomes only the payroll taxes and workers’ compensation insurance.
If you’re interested in seeing how those numbers can work for your shop, I’ll be happy to share my calculations with you. Accept the challenge, attract the best young people, provide a learning culture and win the war for talent!