Running a Shop Operations Finance Labor Rate Accounting+Taxes

Do Labor Rates Make a Difference?

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Some of the shops nearby charge the same as me and yet the “prevailing labor rate” is still lower. Some say that labor rates don’t make a difference. What do you think?

Labor rates are an important aspect of our industry and our business. Many factors also play into the labor rates—demographics, economics, cost of living, property taxes and business taxes, just to name a few. However, I think the biggest opportunity beyond the labor rates is creating a benchmark for repairs, defining the Paint & Material categories and utilizing the “prime, block and feather” operations.

Let me begin with the benchmark for repairs: Australia recently introduced an operation guideline that defines the expected labor time for each spot weld. Although tedious work for development, the idea was to get to real time and provide an opportunity to make gray-area issues black and white. For example, let us say that the average spot-weld including prep time requires two minutes per weld. A repair facility could count the number of spot-welds required by the manufacturer; multiplied by the guide, they would now have a defined formula that would be accepted for reimbursement. Based on the number above, a fender wheelhouse requiring 30 spot welds would require one hour of repair time.

Paint & Materials standardization and definition would also help repair facilities. One carrier may include everything in their equation; another might have portions of it in the category with line item availability for unusual items while others use a “hypothetical program on their computers that is proprietary.” How can a repair facility honestly create a door rate for P & M when carrier definition is different? The standard should be created for example, that door-bonding kits are not included in the P & M category and that ALL carriers can expect this to be over and above the P & M door rate or vice versa.

Lastly, the prime, block and feather operation is under-used; this process is separate from the repair time and cuts into the P & M profitability. When a technician repairs a panel, this operation must be performed before the vehicle can be painted. Repair facilities need to understand that their repair time may shrink slightly, but the prime, block and feather operation will become the standard to “fill the gap” of what is being performed on the vehicle prior to delivery.

Ray Fisher is the president of ASA-Michigan. This article represents his opinion and does not reflect the views of ASA-Michigan.

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