You're Overpaying

We often assume that a technician who has been around for ten years and earns the top hourly rate is automatically the company's most valuable asset. To justify those expensive hourly rates, many owners build rigid, corporate-style hierarchies. It usually looks something like this:

On the surface, it makes sense. But you may actually be building a trap where a Level 3 technician can produce less profit than a Level 2 technician but cost you significantly more.

The biggest friction point in any hybrid pay system (hourly + incentives/commission) is the base rate.

In the trades, we often use a higher hourly rate as a badge of honor. When someone hits Level 3 we bump them up to $32/hr. But mathematically, a higher hourly base can be an anchor to salary growth. 

To keep your labor burden at a healthy benchmark (let's say 18% - 22% of revenue), a technician earning $32/hr has to generate significantly more revenue just to cover their seat than a technician earning $28/hr.

Here is the challenge: By giving your top tech a high hourly safety net, you have to set their commission threshold so high that they rarely hit it.

You end up with two bad scenarios:

You’re essentially paying a premium for a safety net that’s holding both your tech and your business back. 

One solution to this is to measure your techs on the value their truck produces.

This is exactly how Craig Clark, owner at Ocean State Air, managed to scale his business to 40+ techs.

Craig looks at each van as a revenue-producing machine. Not just a vehicle, but a complete business unit. "Now we have vans that are capable of producing or installing one to one and a half million dollars a year," he told me.

In that model, the scorecard isn't years of experience: it's output.

If a Junior (Level 1) tech runs efficiently, offers membership options, collects 5-star reviews, and brings in $50k/month in revenue, they’re essentially a senior revenue producer. So they should be paid like one.

Conversely, if a Senior tech with 20 years of experience skips the inspection, cherry-picks calls, and only brings in $25k/month, they are performing like a Junior.

When you strip away the Level 1-3 labels, the compensation model becomes incredibly simple. It’s not about climbing a ladder, it’s about increasing the efficiency of their truck. 

The most dangerous thing about a tiered system is that you have to manage it.

Every time you make a new hire, you have to decide where they fit. Every time someone asks for a raise, you have to recalibrate the spreadsheet. If you are trying to calculate incentives across three different pay structures manually, there’s a lot of room for error.

This is where you need to get out of spreadsheets and into a system.

Replace your career ladder with a clear path to earnings.

Tell your team: "We don't have Senior Techs and Junior Techs. We have High Performers and Developing Performers. You can have a lower hourly rate and out-earn the guy next to you if you run the plays and drive the revenue. The ceiling is up to you."

That is a career path that attracts hungry techs that want to grow.

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