This is Part 2 in a three-part article. If you missed Part 1 you can read it here: Part 1. Be sure to check back next week for Part 3.
II. Introduction to the Pay Plan
There is a proven trainee technician pay plan that satisfies the above concerns and provides a level of employee involvement that, in many instances, has gone beyond management’s best expectations. The pay plan has been successful because:
- It provides an incentive for all of the technicians involved with the trainee to assist in the trainee’s development.
- It allows management to accurately forecast and monitor a trainee’s progress.
- It is a financially sound method that fairly rewards the trainee, other technicians who assist the trainee, and the dealership.
The pay plan is based on performance parameters, or guidelines, for both daily flat rate hour production and technician cost-of-sales. The technique is characterized by the following elements:
- Trainees are assigned a daily flat rate hour production objective based on their current skill level and experience. Their actual performance is monitored on a daily basis.
- Trainees are paid a weekly salary.
- Using a mathematical formula, an accounting process is implemented to create a “bonus pool” from the hours produced in excess of the trainee’s daily production objective. The pool, called the “accrued bonus,” is set aside for payment to all technicians involved in the trainee’s development.
THE RESULTS OF this approach have been outstanding. The interest shown by productive technicians in the development of a trainee and their eventual conversion to a flat rate pay plan has proven to be very beneficial. The plan works well in both mechanical service and body shops structured to operate conventionally or using advanced production concepts. It is relatively easy to implement and maintain once the basic rules and accounting procedures are understood by all involved.
THE RULES OF the Pay Plan are as follows:
- It is the trainee supervisor’s job to ensure that the trainee meets or exceeds their production objective on a daily basis.
- Trainees are assigned to a specific group of technicians who are responsible for the trainee’s development.
- The group responsible for the trainee’s development receives the accrued bonus amount for every hour produced by the trainee over and above the trainee’s weekly production objective.
- All accrued bonuses are accounted for by indicating the bonus as an account payable until the distribution is made.
- There is no specified time limit for the trainee’s training period.
- The training period ends when the service manager and trainers feel the trainee is ready for flat rate.
- If the trainee quits or is fired before they have worked for one month on an individual flat rate pay plan, all of the accrued bonus is forfeited.
A TRAINEE’S DEVELOPMENT, progress, and accomplishments should be reviewed every 120 days. One of two courses of action could be taken:
- If the trainee, through the eyes of the trainers and management, is prepared in experience and knowledge to progress to flat rate, then a start date and rate should be developed.
Full distribution should now be distributed to those responsible for the trainee’s development, after the prescribed 30 days.
- If the trainee is deemed not properly prepared for flat rate, then a training schedule and a list of accomplishments to be achieved should be set for the next 120 days.
At this point the bonus can continue to grow until the next review date, or Distribution of 50% of the bonus to the trainers—the balance stays in the accrual bonus pool.
Note: Distribution of revenues for T-10 and ASEP should take place at the end of each in-house work segment of the program. Distribution would be 50% of that work segment’s bonus accrual.
Continued next week in Part 3!