Flat rate

Flat rate in auto repair means the job is billed and the technician is paid on published labor hours for that operation. The clock on the wall does not enter into it. A brake job with 1.8 published hours bills 1.8 hours whether it took ninety minutes or three, and the technician who did it flags 1.8 either way.

Two different things travel under the same name. One is how the customer is charged. The other is how the technician is paid. Say which one you mean before the conversation goes anywhere, because the two are set independently and a shop can run either without the other.

How does flat rate work on the customer's side?

The line carries hours times the shop's labor rate, and the hours came from a published guide before anybody touched the car. The Federal Trade Commission describes the two pricing models a customer will meet:

Some shops charge a flat rate for labor on auto repairs. This published rate is based on an independent or manufacturer's estimate of the time required to complete repairs. Others charge on the basis of the actual time the technician worked on the repair.

The practical effect is that a flat-rate shop can quote before the work starts. That is the whole point. A shop billing clocked time cannot hand a customer a number on the phone with any confidence, and a customer who cannot get a number on the phone calls the next shop.

How does flat rate work on the technician's side?

The technician flags the published hours on every job they complete and gets paid a flat-rate wage on the hours flagged. Forty hours in the building has nothing to do with it. A technician who knows a job cold can flag more hours than the week holds, and one who spends the afternoon chasing a wiring fault flags whatever the diagnostic line was worth.

The measurement that comes out of this is technician efficiency: flagged hours over clocked hours. A tech flagging 46 hours across a 40-hour week is running about 115 percent. The number is a pay-plan reading and nothing more, and reading it as a quality score is how a shop ends up with fast work it has to do twice.

How does flat rate work on payroll?

As piece work, which is what federal wage law calls it. The published hours are the piece. Under 29 CFR 778.111 the regular hourly rate "is computed by adding together total earnings for the workweek from piece rates and all other sources," and that sum "is then divided by the number of hours worked in the week for which such compensation was paid."

Work the example on your own payroll. The divisor is the hours the technician was in the building, and the flagged total has nothing to do with it. Take the week's flat-rate earnings over that figure to get the regular rate, then add half of it again for every hour past 40. Shops that run payroll off flagged hours alone are computing a different number from the one the rule describes.

The exemption people reach for when this comes up is section 13(b)(10) of the Fair Labor Standards Act. Read who it covers. It reaches a mechanic only "if he is employed by a nonmanufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers". The test turns on what the establishment sells. Have your own counsel apply that sentence to your shop before you rely on it.

What does flat rate do to the ticket?

It fixes the labor line at write-up, which fixes the shop's gross profit on labor at write-up too. The spread between what the shop charges per hour and what the flat-rate hour costs in wages is the margin, and it does not move once the job is sold.

The exposure sits on the other side. A comeback is unpaid on both ends. The technician reworks the job and flags nothing. The shop bills nothing and the bay holds a car that was already sold once. Work out what one rework costs at your own labor margin before you decide how much attention the comeback list deserves, because the answer is a multiple of the ticket and not a fraction of it.

Where does flat rate stop working?

Diagnosis first. Published guides price the repair and assume the cause is already known, so there is no book time for finding a fault. A shop that pays flat rate on diagnosis is either inventing a number or paying nothing, and neither one keeps a driveability tech.

Teardown is the second gap, for the same reason. Rust is the third. The fourth is diesel work: a 6.7 Power Stroke that needs the cab off, or a Duramax with a fuel system full of metal after a pump failure, is hours of cleanup that no published operation covers. Good shops handle these with a written adjustment agreed before the wrench turns, because the alternative is a technician quietly deciding not to take that work.

Is flat rate the same as a labor guide time?

They are different objects. Book time is a published figure for one operation on one vehicle, sitting in a labor guide with footnotes about what it includes. Flat rate is the pay and pricing practice built on top of that figure.

A shop can use published times to quote and still pay hourly. A shop can also carry a canned job with its own time that overrides the guide entirely and still call the whole arrangement flat rate. The word describes the arrangement, and the guide supplies the input.

Back to the glossary, or read how an estimate gets priced.