n Shop Management
Contractors have the choice to bill customers and pay employees in a variety of methods. Each business should determine what's best suited for them. By Ron Coleman Retaining your technicians, keeping your customers happy, and making more money; these are the cornerstones of your business. Flat rate labour payments don’t adapt as well for construction work nor major retrofit projects. However, it is an ideal setup for service and smaller retrofit type work. This begs the question, which works best for your business? Flat rate? Hourly? A combination of both? Contractors have the choice in deciding to bill their customers based on an hourly rate, on a flat rate, or a combination of both. Independently, they could also decide how to remunerate their employees — this is the money paid for work. Many HVAC and plumbing contractors use flat rate billing for their customers. This has been particularly successful in Ontario and less so in the rest of Canada. There are many advantages to flat rate; billing can be done faster and with greater accuracy, and the customer knows upfront what a repair will cost. There are several recognized flat rate
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Plumbing & HVAC – March 2022
programs that are used in Canada. Does a flat or hourly rate work best for your employees? Should you consider menu pricing? Let’s explore the pros and cons of each.
Higher levels of productivity
Hourly rates are calculated in a fairly familiarized fashion, therefore there isn’t much need to go into how it is calculated. Let’s review how flat rate works. Flat rate pay is payment based on each job that’s completed. An employer estimates the amount of time a job should take and predetermines the amount for those jobs based on the expected time. When contractors use flat rate pricing for their customers, they know what the labour allowance is. That makes it simpler to calculate the time allowances for the employees. Without using flat rate for sales, it is very difficult to use flat rate for paying employees. Travel time and diagnostic time needs to be added to the flat rate for the employee. As this is a normal price for the customer, it is a straightforward process to
allow the equivalent time for the employee. There are advantages and disadvantages to both hourly paid and flat rate. It is important to be aware of these and ensure your employees endorse whichever method you use. Unless employees buy-in to the process, it will be difficult to implement the changes. Flat rate suits motivated and productive employees. At least one study has shown that employees can earn up to 25 per cent extra remuneration. They can take on more work and the company will also benefit from the increased productivity as the employee is motivated to beat the targeted time allowed. It is also important for the technician to be good at diagnostics as once the problem is diagnosed, the company is on a fixed charge and, likewise, the employee. Marginal employees will likely leave, and motivated employees will likely apply for the positions, thus enhancing your workforce and productivity to even greater levels. With the shortage of mechanics, doing more with www.plumbingandhvac.ca
