Commission based pay, also know as performance pay, has a mixed reputation. There are a lot of misconceptions, and downright lies being told about commission based service techs and companies.
In full disclosure, not all of my clients are on commission based pay for their service techs and plumbers. I think that is a mistake.
Because of my belief, I have decided to write the 11 things service techs, plumbers, comfort advisors, managers and business owners need to know about commission based / performance pay.
- Commission based pay is not evil. I’m not sure who decided that commission based pay was the work of the devil, but they have done a good job of spreading that lie. Paying commission is far from evil. It is a good thing.
- Commission based service techs are not crooks. Who is spreading this crap? Commissions don’t encourage you to steal. As a matter of fact, it may interest you to know that 55% of all business theft actually comes from managers, not front line people getting paid commissions.
- Fixed labor percentages solve massive problems. Performance pay locks in one of the most troublesome numbers in business: field labor.
- Budgeting becomes easier. Once your numbers are locked in, budgeting becomes so much easier.
- Accountability becomes your business partner. Techs are actually more accountable to performance when they are paid for it.
- Skill level goes up. Commission based pay requires a technician to be a skilled communicator and service tech. In the case of a pure salesman, he will sharpen his communication skills.
- Reputation becomes more important. A commission based company never wants to get the impression of going for the “money grab.” It focuses the entire company on the critical task of maintaining brand.
- Callbacks go down. No one wants to do double work for the same pay. Performance based pay encourages slowing down and doing it right the first time.
- Marketing becomes more important. When your techs are not being paid for cleaning the shop, you will do your best to keep them in calls.
- Service Techs get paid what they are worth. This is important. People deserve to be paid what they are worth. Not more, and not less. If you are receiving an hourly pay, then you are always in one category or the other.
- Hybrid pay is another form of commission pay. If you are saying to yourself, “I’m hourly, and I get a bonus at the end of every month depending on how I performed.” Then guess what, that is another form of commission based pay. That’s cool too.
There is my list of 11 things to know about commission based pay. I hope you do something with it. “Like what?” Switch to commission, or at least a form of performance pay. That would be the first thing I would recommend.
Do you need help making changes in your business?
What would you add to this list?
PRESS PLAY for Sales Changed the Game for Garrett Lynn of Aire Serv Tyler!
Not a fan of the hybrid pay,,
Hey Fred, I’m curious why you are not a fan of hybrid pay. Does that make you a fan of commission, or hourly. I’m not here to judge your answer, I want your point of view.
You can have a great day one day and maybe not another due to factors out of your control. ie.. Having a bunch of warranty calls or call backs from another tech, or even having slow days. Where I work at now we have to achieve a certain amount per month of earned income based on your hourly wage and then after that you can get a bonus.
Hi Todd,
We at Hess Air have a few “add-ons” to your list:
12. Rates adn fees are set by the company based on business requirements to operate a successful operation and proved great service that is expected from the consumer. Techs don’t set the fees.
13. In performance pay, if techs don’t fix it right they go back on their own time, hence it provides for better service and diagnostics.
I have a true hybrid plan that pays techs on a sliding scale of 18 hr / 18% apprentice level up to 22hr 22% master tech I will pay 1/2 hour on a call back for apprentice 2 nd call back they go with a sr tech for free. I find this slows the opportunistic parts changer and gives them a little time to noodle through a complex diagnostic without having to streets about not getting paid. I think even a apprentice service technician should make 50,000 a year my master technicians are making in between 75 and 90,000 you can easily break six figures if you’re proficient at system sales. Company last year had an overall 12.5% p.m. $3.7 million with two sales people and fo technicians
Paying mechanics on commission is a gold mine for businesses. They are are at no labor expence risk. If business is good they make a fortune and if business is slow, only the techs loose. Most shops charge $100.00 + an hour and pay their techs $20.00 or less. I’ve seen techs charge for parts and labor that were never installed. This is little more than modern share cropping. Businesses just need to pay people a decent wage for their labor.
There are two kinds of people: Those who work for a living and those who mooch off the ones who do work.