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Welcome to Auto Repair Estimating. These lessons are designed to provide you with the basics to Auto Estimating. I hope you enjoy the lesson. Donnie
Lesson 5 – Labor Rates and Labor Times
“It has been my observation that most people get ahead during the time that others waste.” ~Henry Ford
What This Chapter Covers:
This chapter covers how to determine and calculate body, paint, structural, and mechanical labor rates and materials needed. This includes material and operations found in the estimating guide and operations not found in the estimating guide.
Why This Is Important:
For an estimator, it’s important to understand how labor rates and material charges are determined. To create revenue and profit for the repair shop and technicians, the estimator must identify and add operations not found in the guide to the estimate to stay ahead in today’s challenging marketplace.
Topics Covered In This Chapter Include:
• Estimating Guide Labor Times
• Repair Shop Labor Rates
• Understanding Estimating Times in Tenths
• Labor Categories—Body, Refinish, Mech, Structural
• Judgement Labor Time
• Adding Not Included Operations
• Getting Not Included Paint For Operations
• General Not Included Operations
• Increase Shop Profit
• Sublet Work
This chapter has been aligned with the following 2013 NATEF/ASE tasks:
•B:8 Apply estimating guide footnotes and headnotes as needed. HP-I
•B:9 Estimate labor value for operations requiring judgment. HP-G
•B:10 Select appropriate labor value for each operation (structural, non-structural, mechanical, and refinish).
•B:16 Determine price and source of necessary sublet operations. HP-G
•B:17 Determine labor value, prices, charges, allowances, or fees for non-included operations and miscellaneous items. HP-G
This chapter covers labor rates and material charges. This is a good time to mention the importance of doing your best when it comes to this chapter. The collision repair industry, like other industries, has become very competitive. Insurance companies save money on claims. It’s not their fault. They deal with insurance fraud, and a few shops may have tried to take advantage of insurance jobs.
Regardless of the reason, the reality is that the repair shop and technician should be paid for the work performed. As I’ve mentioned many times in this book, we’re working for the customer. It is our job to assure the customer that high-quality work is being performed on their vehicle to repair it back to its safe and pre-accident condition. Never allow shortcuts to be taken to save someone else money.
Insurance companies require more documentation than they used to, and they need to clearly understand why you are charging what is on the estimate. They want to make certain the operations on the estimate are required and materials are needed as stated on the estimate. Chapters 5 and 6 cover adding operations and materials that are not included in the estimating guide. Take the extra time needed to read these chapters, check out the additional resources, do your own research, or whatever it takes to educate yourself on these topics. By doing this, you will better understand how to deal with insurance companies, get paid for the work performed, and stay ahead in today’s challenging marketplace.
How Are Estimating Guide Times Determined?
The labor times in estimating guides and computer estimating systems is the time it should take a skilled technician to perform the task. However, this is for new, undamaged parts. The labor time does not include pulling damaged parts to gain access to bolts that may be rusted or corroded bolts and harder to remove than new ones. If this is necessary, you need to add the additional access time to the estimate.
Shop Labor Rate
The shop labor rate is what the shop charges per hour. This varies depending on the shop, as each shop is responsible for setting its own labor rate. In fact, it is against the law for shops to get together and discuss labor rates. That would be considered price fixing, which is illegal. Here is an example of a repair shop’s labor rate. If the shop’s labor rate is $45.00 per hour and the estimating guide shows 3 hours to replace a fender, the shop would charge $135.00 for this job. This does not include supplies or tax.
$45 Per Hour x 3 Hours = $135
Estimating Times In Tenths
All estimating guides use tenths. You may see 2.3, which is 2 hours and 18 minutes. There are 6 tenths in an hour, so multiply each tenth by 6 to determine the time in minutes. For instance, .5 equals 30 minutes, and 1.5 equals 1 hour and 30 minutes. This gives us an idea of how labor times are provided.
2.3 Hours = 2 Hours + 3×6
2.3 Hours = 2 Hours and 18 Minutes
• 0.1 = 6 minutes
• 0.2 = 12 minutes
• 0.3 = 18 minutes
• 0.4 = 24 minutes
• 0.5 = 30 minutes
• 0.6 = 36 minutes
• 0.7 = 42 minutes
• 0.8 = 48 minutes
• 0.9 = 54 minutes
• 1.0 = 60 minutes or 1 hour
Labor times fall into different categories, which are body labor, refinish labor, frame labor, and structural labor. It is important to record the type of labor correctly, because most shops charge different labor rates for each labor category. For instance, a shop may charge $45 per hour for body and refinish labor, $60 per hour for structural labor, and $75 per hour for mechanical labor. These are just figures I provided as an example, but the estimator must know what labor category each task falls under.
Body labor usually consists of nonstructural labor, such as replacing body panels, body repair, and plastic repair. According to the Mitchell P-Pages, when repairing body damage, body labor includes all of the steps to straighten the damage, applying fillers, shaping the filler, and finishing the filler with 150-grit sandpaper. Feather edging and all finer grits of sandpaper used after that point will fall into the refinish labor.
Refinish labor picks up where body labor leaves off if painting is required, for instance, the damaged area that was finished off with 150-grit sandpaper from the body department. Now the paint department gets the job and feather edges the damaged area, applies primer and block sands, cleans, masks, paints, and clear coats—basically all of the steps necessary to paint and clear coat the parts being painted.
The refinish time for each part will be provided by the estimating guide or estimating system.
Structural labor is time for straightening structural damage. If there are tasks classified as structural repairs, some estimating guides and systems will show an (s) by the labor time or in labor notes. The structural labor rate should be applied to these operations.
Mechanical labor usually includes replacing mechanical, electrical, and suspension components. For instance, in a front-end collision, many times the radiator and a/c were damaged and will need to be replaced. These tasks are generally considered a mechanical task. Most estimating guides and estimating systems will show an (m) by the labor time or in the labor notes. The mechanical labor rate should be applied to these operations.
Although the estimating systems may classify the task as structural or mechanical, the repair shop SOP may have a different opinion. These categories are not fixed.
What would you do, repair or replace? If repairing, how many hours would you write on the estimate?
Judgment time is an estimated time given to a procedure by the estimator that is not provided in the estimating guide or estimating system.
Not every operation is going to be included in the estimating guide. For instance, the labor time for all of the dent repair, plastic repair, frame repair, and many other operations are not in the estimating guide. This is where experience is important. When you have to determine or estimate the time it should take to repair a dent on a right front fender, it is called judgment time, because you are the judge and make the call. Therefore, judgment times can vary greatly from shop to shop and estimator to estimator.
Estimating Labor For Add-on Accessories
The estimating guide provides labor times for OEM parts, but labor time will not be provided for add-on accessories. The labor will be a judgment time given by the estimator to perform the operation, which may include such accessories as body kits, bed liners, and bed rails.
We covered adding the labor time to the repair estimate from the estimating guide. We also covered judgment time, which is not in the estimating guide. However, each part replaced or operation performed is going to have other items, which are items or labor time that is not included in the time provided in the guide. These items will need to be added to the estimate. This is what an estimator needs to pay extra attention to, as many mistakes are made with such operations, and a lot of money is left unclaimed.
It’s Like Going To Walmart
What is included and what is not included in each operation? This is something that you need to ask yourself every time you add a line to your estimate. This is where most mistakes are made when writing an estimate, which results in dollars lost for the shop. There are a great many not included operations that go unclaimed on most estimates. Many times the estimator claims they do not put it on the estimate because the insurance company will not pay for it. There is some truth behind this story, but it is usually because they did not write it on the estimate correctly. You must itemize each procedure if you plan to get paid for it. It is like going to Walmart. Have you ever gone to Walmart and put many items into your cart, but when you went to check out, the price almost gives you a heart attack? Well, let’s take this one step further. What if they gave you a receipt with just the total amount on it? You would probably claim that they made a mistake. When you get the itemized receipt, however, you realize all of the prices are correct. It just added up to more than you thought it would.
I don’t know if this has ever happened to you, but it happens to me all of the time. Insurance adjusters are the same way. If it is not crystal clear what the estimate is charging for, they claim that it is not right, and they do not want to pay that amount. I sure wish I could do that at the store! If you have every item listed separately, though, they can see that your charges are legitimate.
To determine what not included operations you can add to your estimate, look in your P-Pages. Everything that is included and everything that is not included will be listed. I recommend that you take some time and study the P-Pages and know them by heart.
Getting Paint For Not Included Operations
As an estimator, you must try to get paid for all of the work performed and materials used. Does this mean that the insurance company will pay for anything you ask for? Probably not, but it’s the estimator’s job to negotiate and try to get paid for everything.
Remember, you are working for the customer and should strive to provide quality work, not cut corners to save money for the insurance company.
Ask For It
Insurance companies are a lot like the IRS. There are many things that insurance companies are willing to pay for just as the IRS has many tax-saving benefits for businesses. If you don’t ask for it, however, neither one will offer to give it to you. I am not saying that insurance companies will pay you for everything you ask for, but it is certain you will not get paid for the operation if you don’t ask for it.
There may be as much not included time on a part as the time given to R&R the part. Let’s take a look at an example.
• Remove and install or replace:
• Headlamp assembly if attached to fender
• Cornering lamp if so equipped
• Side marker lamp if so equipped
• Turn indicator lamp if so equipped
• Parts attached to fender except those listed in the Not Included section
• Replace clip-type moulding for base model vehicle
Not Included Operations
• Refinish front fender
• Aim lamps if attached to fender
• Remove and install front bumper
• Remove and install hood
• Remove and install or replace wheel
• Remove and install adhesive exterior trim; clean and retape
• Replace new adhesive exterior trim
• Install stripes, decals, transfers, or overlays
• Drill installation holes
• Cut installation holes
If you are a new estimator, you need to get the list out and go over it for every part that you are replacing. Ask yourself if any of the not included operations are required to perform the specific job that you are estimating. For instance, on the fender above, ask: Will new adhesive need to be replaced on the trim? If the fender has trim that will need to be removed, then add time for it on the estimate. If not, don’t add it. Go through the not included operations to determine which ones apply to the vehicle being repaired. This is just an example of a fender. The not included operations get quite extensive on parts like door skins.
General Not Included Operations
In addition to looking at each specific part to determine the items not included, there are some overall items that may apply. Be certain to look over this list when checking for additional items to add to the estimate.
• Access Time: Remove damaged parts by cutting, pushing, pulling, etc., to gain access.
• Anticorrosion Application: Remove or apply weldable zinc primers, wax, petroleum-based coatings, undercoating, or any type of added conditioning.
• Broken Glass Cleanup: Anytime glass as been broken in an accident, the time to replace the glass does not include time to clean up the broken glass.
• Detail: Time to clean or detail the vehicle is not included.
• Drill Holes: If holes are required for emblems or any other reason.
• Time to reset memory code function for seat, stereo, etc. When battery has been disconnected.
• Fabrication: Fabrication and installation of reinforcements or inserts.
• Frame Setup: Time to set up frame to measure and pull.
• Free Up Parts: Additional time to free up parts frozen with rust and corrosion.
• Measure and Identify: Time to measure and identify structural damage.
• Transfer Time: For welded, riveted or bonded brackets, braces, or reinforcements from an old part to a new part.
• Trim and Fit: Time to trim and fit for new fiberglass, steel, and aluminum panels.
• Non-OEM Components: Time to remove add-on equipment, such as a bed liner.
• Feather, Prime, and Block: If the repair included damage that was repaired and required body filler, time for feather edging the damaged area, masking for primer, applying self etch or epoxy primer to bare metal, apply primer surfacer, apply guide coat, and block sand the primer surfacer.
• Color Sand and Buff: If dirt, excessive orange peel, or runs are in the finished painted surface, color sanding and buffing will be required.
This will give you an idea of the not included items. However, I strongly recommend that time be spent looking at the P-Pages of the estimating guide or computer system you use.
Increase Shop Profits
Emblems must be R&I if a panel is painted or replaced. Don’t forget to add to the estimate.
Now you can see the amount of money that you may leave unclaimed on each panel. Many of the not included items will need to be performed on each part repaired or replaced.
Of course, only add what applies. You do not want to add time to R&I the hood if you do not need to remove the hood to R&R the fender. Look over the list on each panel that you estimate, and add what applies to the estimate. If a fender pays 3.0 hours, you may be able to add an extra .5 or more hours of not included operations. This will lead to major profit for the company and technician at the end of a day, week, and year. Who knows how much .2 or .3 for every emblem you replace may add up to at the end of one year!
Tell A Story
The key is to list each item separately. You need to tell a story with your estimate, and it needs to be easy to understand. If you try to bulk or clump items together, chances are the insurance adjuster may refuse to pay. The estimate needs to show the big picture crystal clear for everyone to easily understand.
The P-Pages or procedure pages have a lot of useful information you need to learn. I recommend that you study the P-Pages and learn them well. You can access a copy of the Mitchell or Motor P-Pages in the resource section.
Sublet is work the repair shop charges for but has someone else perform. For instance, the estimator may charge the customer to align the suspension but have a suspension shop perform the alignment. The customer will pay the repair shop for the alignment, and the repair shop is responsible for paying the suspension shop.
Sublet work may include suspension work, mechanical work, glass work, window tinting, sprayed on bed liners, stripes and decals, aluminum repairs, towing, or other procedures the repair shop may not perform. Some repair shops perform all of their own work, while others sublet parts of their work to other businesses.
It’s like a home contractor. They provide a homeowner with a bid and contract the concrete to a concrete company and the electrical work to an electrician and so forth.
There should be some percentage of a markup on sublet work, as it takes time to set appointments and arrange to have all of the sublet work completed. The percentage of markup is usually going to be 20% to 30%, but this is going to be up to the shop manager or estimator and their relationship with the businesses they use.