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Regardless of the industry, many contractors are saying the same thing: "We have more than enough work but we can't find qualified techs." Guess what? It's not just a problem in the electrical, plumbing or hvacr industry, it's a problem within the entire trades industry.
Let's assume you paid a base wage of $20 to 25 per hour, provided medical, dental and vision insurance plus a 401K plan, and a year-end bonus. Let's add another week's vacation and let them earn education and tool credits based on billed hours. More than likely you will not have any problem finding a qualified tech.
In fact, if the entire industry offered those kinds of benefits, chances are more high school grads would look at the industry as a viable career path. A salary of $25 an hour equates to $52,000 a year.
Many contractors pay an hourly rate between $12 to $18 an hour and a portion of the medical benefits. Vacations? Many contractors offer one week and if the tech has been there a long time, maybe they'll get two weeks with a few holidays thrown in. Do you notice a difference?
But, now you're saying, "Great idea, but what contractor can afford to pay $25 an hour with all those benefits?" Have you had a telephone, copier or computer tech work on your equipment lately? If you have, did you look at the bill? The hourly rate was some where between $100 and $150 per hour—and you paid it!
When AT&T, IBM and Microsoft set rates for their techs, they based those rates because they have run the numbers and found out that they have to charge that much to cover their costs and generate a profit. Guess what? So do you!
Making it reality
At a recent seminar I asked each contractor to list all of the benefits they would like to offer their techs, just so we could see how much it would increase their hourly rate. The results were amazing. To keep things simple, let's do the exercise.
For starters, the hourly rate for technicians will be $25, including the company matching taxes. The technicians get an additional week of vacation at a cost of $1,000 a year ($25 anhour x 40 hours), as well as four more holidays at a cost of $800 a year. For argument's sake, I'll add in insurance and pay all the medical insurance for a family of four at a cost of $400 per month or $4,800 per year. Dental and vision insurance will run another $200 per month or $2,400 for the year.
How about a 401(k) plan for retirement? I will contribute $1,500 a year to the plan. And, I'll chime in another $750 bonus at Christmas for a year-end cash bonus. Under this scenario, I can just see the techs coming from across town, from another city or perhaps even from across the country. They are lining up at the door, waiting to get hired. No shortage of techs here!
In addition, I will build in another $1.50 per billable hour for an "earned" tool allowance and continuing education.
How will the extra costs going to affect the hourly rate charged the customer? The first question is how many hours are available to charge the customer? The normal non-billable time for service techs is 40 percent to 55 percent, and I will make it 50 percent non-billable time, which means of the 2,080 hours the company pays for during the year, it can actually bill out 1,040 hours or half the time. Here is a total of the additional costs put forth and what is means to you:
If we take the additional $27,890 and divide it by the 1,040 hours you bill the customer, it means the company will have to increase its hourly rate to the customer by $26.82 an hour. Furthermore, since we need to add the $1.50 per billable hour for tool allowance and education which now makes our rate $28.32.
The range for the average service tech on a time and material basis is $60-$80 per hour. If we assume the current rate is $70 per hour and then add our $28.32 per hour for the extra benefits, the company will need to charge $98.32 per hour. "But Tom, my customers will not pay $98.32 per hour for service work!" You may be right. So what is your current alternative? Right again! Switch to flat rate pricing. The average internal hourly rate on flat rate pricing is $100-$150/hour. If we switch to flat rate pricing, is our $98.32/hour rate a problem—NO!
Let's face it. If we are going to solve the tech shortage in our industry we have to offer the pay and benefits that will attract the best talent in the industry. If the young people of the future are going to consider a long-term career in our industry, the pay and benefits are going to have to be there to attract them. Those that make the changes will attract the top techs and will go on to be successful and profitable companies.
author: By Tom Grandy