Over the years and having spent a lot of time working on schedule cleanups, the inevitable subject of charging back technicians for incorrect labor operation usage comes up. Everyone realizes that in some cases, a technician was paid more for the repair than the claim eventually ended up paying.
It’s always turns into an interesting discussion and one I have some strong opinions about. The knee jerk reaction is that the technician should be charged back the hours that they were overpaid. I’ve seen it time and time again but once some thought is put to it, the answer isn’t as clear as it once seemed.
Let’s face it, in the case of a warranty schedule that’s gone out of control, it’s unlikely any detailed review of many smaller claims that have been underpaid or any claims that have been overpaid happens. That means in the case of overpaid claims, parts or labor sales may not have been credited with the appropriate
amount of additional money paid on the claim.
Now let’s extend that to the technicians. When a claim is finally paid and the labor is paid more than originally claimed, do you credit the technician the additional time you were paid? It’s doubtful. Very few places do.
In all fairness, if you’re going to take time away when you’re not paid as much as you originally paid the technician, you should in turn pay them when you get paid additional labor time they weren’t flagged for. Why would you take back the time from the technician when you don’t give them the additional time they should have been paid?
Let’s take it a little further. If your service advisors, parts counterpeople or management are paid a percentage of sales or gross, do you in turn take away the money they made on the unpaid difference? I’ve never seen that happen.
If we were talking about audit charge backs and the claims were charged back for obvious problems with documentation, then I think a case could be made for charging someone back, as long as they were told ahead of time that they would be charged back and it had been determined they are indeed the cause of the charge back. There shouldn’t be any question about who is at fault and only the person that made the error should take the hit.
When it comes to schedule clean ups, it may be a good idea to temporarily suspend some of the rules and suspending it for charge backs could be a wise move. When you’re dealing with a schedule clean up, time is of the essence and dealing with detailed notes about one-tenth of an hour labor short pays is just taking time away from getting the schedule cleaned up as quickly as possible.
If you’re going to put in place procedures in place to charge back any labor time not paid on a warranty claim, you’ll also need to credit any additional labor time payments. That way it can’t be said the dealership is only making adjustments that are in its favor.
To make it a truly fair system, anyone else that is paid based on sales, gross or hours flagged should get the same treatment. If a service advisor is being paid off sales or a shop foreman is getting a commission based on shop hours turned they should take a hit or get credited too.
One thing you need to think about after having read this article. I’m talking about warranty claims that have been labor flagged, closed, submitted and paid. If we were talking about claims that hadn’t been closed yet and you’re correcting the labor time before it gets submitted, you should make the time adjustments in the computer and if you’re still using them, time flag sheets.
A good system that is fair to everyone will keep problems to a minimum. Setting up a system that seems to favor the dealership will be looked upon with disdain. In the end, being fair will keep you from losing more money from discontent in the shop than you will gain by keeping the gains and charging back only for losses.
