What Exactly is a Prevailing Rate and How Does It Affect You?
Written by Ed Attanasio, Autobody News
Published February 9, 2022
If you’re a shop owner anywhere in this country, your labor rates have been a serious concern since day one and the numbers have likely kept you up at night more than once.
You work so hard to make OE repairs and provide quality to your customers, but in the end, you’re struggling because your labor rates won’t cover your expenses.
With the goal of creating momentum as we enter 2022, the Auto Body Association of Texas (ABAT) recently asked AkzoNobel Senior Services Consultant Tim Ronak to make a presentation, “Economics 101: What Exactly is a Prevailing Rate?”
Ronak discussed labor rates and the effects of inflation. Up front, he explained everything he shares in his presentation is his opinion and his alone, and is not necessarily the opinion of AkzoNobel.
The main question Ronak asked the ABAT members in attendance on a Zoom call was this: how much do shops need to do repairs while making a profit and what exactly is a prevailing rate?
Ronak presented the two components needed to determine the labor sale amount---labor units and the labor rate (example: 10 units X $60 per unit = $600 labor sale). The "rate per unit" is only part of the labor sale equation.
“Getting a labor rate increase is valuable, but in many cases, it’s not as vital as billing for all of the items or procedures required to fully return the vehicle to the ‘pre-loss’ state promised in most insurance policies,” Ronak said. “Many shops use things like BillableGenie that help shops to identify procedures typically overlooked and get paid for things many shops don’t get reimbursed for.
"So, don’t think that if a rate increase is not coming your way that it’s the end of the world; there are other parts of the equation that you need to be able to bill for---it’s not just all about the rate. Actual billed operations often fall short of what you can actually justify as required procedures.”
Ronak then talked about a lawnmower repair shop that was charging $50 hourly in 2000, while auto body shops were getting $40 per hour for labor.
“Everything you need to fix a lawnmower can fit into a 12-inch by 10-inch box that you can carry with one hand,” he said. “But, in our industry, we need...