How Do I Set the Labor Rate for a Heavy Truck Repair Shop?
Work backward from your costs and billable hours, then check it against your market. The formula, a worked example, and why matching the shop down the road is risky.
Related articles
Work out what each billed hour has to cover: technician pay, overhead, and the profit you want. Then check that number against your market. Copying a nearby shop's rate is risky, because you do not know their costs or whether they are making money.
What is the formula?
Labor rate = (annual labor cost + overhead assigned to labor + target profit) ÷ annual billed hours
Here is an example using made-up numbers. Replace them with your own.
| Item | Example |
|---|---|
| Technicians | 4 |
| Paid hours each year (4 × 2,080) | 8,320 |
| Billed hours at 75% of paid hours | 6,240 |
| Tech pay with payroll costs | $300,000 |
| Overhead assigned to labor | $260,000 |
| Target profit | $100,000 |
| Rate needed | $660,000 ÷ 6,240 = about $106 |
Notice the billed hours. If you only bill 60% of paid hours, the rate needed in this example climbs to about $132. Unbilled time affects your rate as much as your costs do.
Where do I find my market rate?
Ask fleets what they pay, ask your suppliers and insurance agent, and call around. WrenchPilot's Breakdown directory also collects public labor rate information for repair shops. Treat all of these as a rough check.
Should we have more than one rate?
Many shops do. Road calls, after-hours work, diagnostics, and specialized work often carry a higher rate, while contracted fleets may negotiate a lower one. WrenchPilot lets you set several hourly rates and choose among them, so the right one is used on the job.
How do I raise a rate without losing fleets?
Give written notice, raise it on a set schedule rather than rarely and sharply, and be ready to show response time and quality. Some customers will leave. Look at their profit before you discount to keep them.
What else affects the result?
Raising the rate does nothing for hours that never reach the invoice. See how to see what techs are working on and how to find profit per job.
Want to see it on your own work?
Bring a real repair order to a WrenchPilot demo, and check current pricing first. Lite is $100 per month for one user. Pro is $300 per month with up to 10 technicians, no per-user fees, and no contract.