Fixed Operations
Technician Benefits: The Unknown Gold Mine
By Ed Kovalchick
When I began in the automotive business in the 1960s, most technicians were paid on a 50/50 split. The labor rates were in the five to seven dollars per hour category, if you can imagine that, and the "mechanics" were paid half of what they produced in revenue.
It wasn't as bad at it appears on the surface though, because it was relatively easy to produce at 150 to 200 percent output, so the seven dollars per hour income was easily converted to a real $10.50 to $14 per hour income, of which the technician received half. Flat rate book time was generous, and the volume of common maintenance vehicles needed was at least six times greater than today.
Minimum wage was about $1.25 per hour as I recall, and earning $7 per clock hour provided a wage that a family could live on comfortably. My apartment rent was $12.50 per week, and one could buy a brand new Volkswagen for about $1200 and a gallon of gas for 27 cents. A hamburger cost 15 cents, and a movie theater only collected 25 cents at the door. There was actually penny candy.
However, there were few benefits and few deductions as a result. Health insurance was only about $30 per month, and other than a meager social security deduction that was paid up about mid-year, there were few other extras to pay for, or to rely on.
Today, the costs of maintaining an employee are both significant and, for the most part, hidden. Few managers actually know all of the benefits afforded today's employee, and almost no one knows the real costs. What managers do know is that it takes at least 70 percent retention of a labor dollar to pay the many costs of operating a business and still return a significant net profit.
Here is a list of costs associated with maintaining an employee. Some are well known, while some are hidden:
- Workers' Compensation-a form of health and disability insurance specifically for employees who may be hurt on the job.
- Health Insurance-for the technician and the family for health problems not associated with work.
- Disability Insurance-a separate plan to provide an income in case the technician cannot work.
- Social Security-a federal retirement package for the technician, consuming over 14 percent of the gross income, of which the company pays half.
- 401K-a second retirement package to supplement social security. Usually a matching investment.
- Liability Insurance-technicians are protected in case they are sued while on the job. An example would be in the case where a technician driving a customer's car collided with another vehicle on the highway, and it was the technician's fault. I have seen this cost as high as $150 per technician per month.
- Unemployment-a fee assessed to the company to fund period of technician period of unemployment. Covers temporary layoffs, or long-term periods of unemployment.
- Sick Pay-money available to provide income for days missed due to illness, or most often used for personal reasons.
- Vacation-pay earned over time that usually covers relaxation and travel.
- Holiday Pay-pay for non-working days used to participate in some traditional celebration.
- Training Pay-pay available for perfecting a technician's craft.
- Life Insurance-used to provide income to remaining family.
- Tool Insurance-purchased as part of the overall insurance package, this provides coverage for technician tools stolen or damaged by fire, for example. Many managers are not aware of this coverage.
- Uniforms/Safety Shoes-often paid in full by the company.
- Tool Replacement-small items like drill bits are often paid for by the company.
- Parts Discounts-usually parts can be purchased at significant savings.
- Vehicle Discounts-new and used vehicles are usually available at significant savings too.
All of these items, and there may be more, add up to a huge amount of money paid on behalf of the technicians each year. Unfortunately, almost no technicians are aware of these dollars spent on their behalf, almost none are presented with an end-of-year statement showing this expenditure.
Payroll companies say that benefits account for about a 35% increase in payroll costs, and with technicians the costs may be higher. The more those technicians are educated about the many benefits they are provided, the more they can appreciate what they are receiving. Otherwise, most of these employee costs are just wasted money.
Ed J. Kovalchick is CEO of Net Profit Inc., an international automotive manufacturer and dealer, training and management-consulting firm, located in Alabaster, Ala. Mr. Kovalchick is a featured speaker and instructor at conventions, 20-Groups, associations and other automotive-related events worldwide. He is also a former six-franchise new car dealer and independent shop owner. ekovalchick@dealeronline.com.
