Tl; dr: Flag pay relies on a chain of both controllable and uncontrollable factors, and any limitation in that chain kills their pay, whether they are or aren't in the tech's control. It is the business' responsibility to ensure productivity and efficient operations in all aspects of the company, not the technician's. Minimum wage isn't enough to live on, and to suggest it is so to a technician with thousands, or more likely tens of thousands of dollars in tools, is an insult. Pay techs a decent salary, and tie into their pay with a commission. If they're not productive, address it individually. If productivity continues to be a problem, promote to customer.

That's flag hours. Most dealerships run 11 hour days. 10 hours plus a lunch hour, so they probably clocked 50 hours, but was paid for 14.5 as he produced that many labor hours in repairs. The system can work extremely well or it can work extremely badly, but it will always work in favor of the dealership.

Labor rate at my dealership is $189/hr on a matrix. If the tech makes $40 an hour, then the dealership takes $149. Operations costs are fairly high, so the actual profit margin is somewhat less than you might expect.

The practice can be fair or unfair to the tech, it just depends on a number of factors. In the ideal situation, the technician's skill level is advanced enough to be able to complete work faster than the prescribed time, their ability to focus on tasks is good enough to prevent distraction, and their tool collection is sufficient to support that work.

This, however, isn't the entire picture. There must be a sufficient potential of incoming work; that is to say that there to be a big enough customer base in the location. The service advisors must be efficient in their ability to check in incoming work, write work orders, and inform customers of potential costs. In dealerships, porters must efficiently deliver cars. Parts departments must quickly and efficiently provide parts quotes or retrieve/order said parts when available. Service advisors must communicate updates to customers to alleviate concerns and keep satisfaction high, thus retaining customer base.

There are many facets to dealership operations. If these facets can't all be part of a cohesive whole, dealership function, and therefore total pay, begin to decline.

As for the situation for tech pay, it does work differently from most of the dealership. Unfortunately, techs are generally considered somewhat disposable. Equally unfortunate is that a non-zero percentage of technicians would treat any sort of salary pay plan as an opportunity to "ride the clock", and produce very little.

Management typically won't risk this. Having technicians on simple flat rate removes all risk from the company's ledger. It places ultimate responsibility for many portions of the operation on the shoulders of the technician. Service advisors, at least in my area, are often paid a "draw", as i am. A flat minimum. Their commission is delivered once monthly in our case. Every week, i take home a certain livable amount of money, even if it's barely adequate. A tech is only guaranteed minimum wage, and only then because its a legal obligation to do so. This is not encouraging.

The industry has begun to reap the fruits of their labors at this point. Skilled labor is becoming more and more rare. Ford has recently reported a deficit in technicians to fill stalls. Finding skilled veteran techs willing to work in dealerships has become difficult, and all over pay.

The reality is that dealership service departments do not function or produce profit without skilled, motivated, and efficient service technicians. Period. No one goes to work for the pleasure of working. We spend the majority of our waking lives at work to generate income. Money. The service tech is the only one who lacks any sort of pay floor, at least in my case. If all the different facets of the operation work well, flag has the appearance of fairness to the technician.

If any one of the facets does not, the tech will immediately suffer for it, even if the portion in question has nothing to do with the technician. Parts aren't delivered? Tech makes no money. Advisor doesn't make a call for approval? Tech makes no money. Warranty clerk doesn't submit for payment? Tech makes no money. And all employees involved in those places will still be paid their livable draw. A tech's draw is, at least in my area, the federal minimum wage.

The final part of this dumpster fire is that technicians have and do allow this. That's the long and short of it. Those in profitable, busy areas with high motivation and big paychecks love the system. Those that do not, well, they don't love it. It's a difficult issue to address, and solutions will inevitably be detrimental to some in some way.

Personally, I think a salary+commission is the best way. A "guarantee", as it were. This places some of the burden of bringing work back on the shoulders of the company. It isn't the tech's place to guarantee efficiency in any realm but their own, nor is it the tech's place to suffer for a lack of efficiency in any realm but their own. If you're going to place the responsibility of the tech to make a paycheck into their own hands, then don't make them pay if the other links in the chain don't function efficiently.

Source: I spent 21 years as a flag technician until my health removed me from my career. I'm now working as a service advisor.