If we’re being honest for a minute we have to acknowledge that knowing you’re doing good to customers by helping them have their car in perfect conditions might not be the #1 reason why your service advisors come to work every morning. It’s probably the $.
For service managers, the pay plan of the service advisor is probably the most important tool to keep them motivated. The compensation plan has a direct impact on the behavior of advisors, the way they work with customers, and ultimately determine the profitability of the service bay. A good plan should link an advisor’s personal motivation to the financial objectives of the dealership.
Let us talk about the key principles and components of successful service advisor pay plans through industry experience and best practices.
A competitive and motivating pay plan is important to keep your service advisors motivated and retain them. It’s the best way to maintain profitability and build customer satisfaction. Incentives should be tied to dealership goals in order to keep your financial margins level and reward high performance.
A pay plan helps to:
Keeps profitability for your dealership.
Helps to control and motivate employees, making them work harder and better.
Rewards achievements and performance improvement, rewarding advisors to work beyond expectations.
Makes both the firm and employee a winner.
Service advisor pay plans typically combine an hourly rate or base wage with a bonus and commission that is performance-based.
This structure provides a base salary to cover employees’ fundamental needs, which is important for motivation and problem-solving.
Bonuses are then added as incentives for specific jobs and performance goals, aimed at maintaining profit margins.
It’s directly tied to technician pay models, margins, and retention
$4,500 salary monthly + 6% of total sales (no discounts and no sublets) + a $1,000 CSI bonus.
$19 an hour with a bonus of $2 per labor hour, which amounts to approximately $50,000 a year.
$15 per hour base pay (state regulations prohibit commission-only) and a tiered percentage commission that would be triggered if overall gross is over $50,000.
Advisors are paid by a percentage of what they sell or produce. The compensation is not salaried or hourly past the first guaranteed period.
It can be extremely rewarding for experienced, high-producing advisors with some making as much as $25,000 in a month. However, it can be difficult initially. A monthly minimum guarantee (for example, $4,000 a month) can act as an insurance policy.
Another plan is draw against commission. The advisors are advanced a fixed amount, for example, the advisor’s plan includes $16.75 an hour, a $2,000 draw, 4% gross, and 1% good CSI. The advisor would need to make more than this advanced figure in commission in order to get more money, or else the shortage is payable to the dealership.
When designing the performance-based portion of a pay plan, consider these common elements:
| Pay Plan Element | Details & Examples |
|---|---|
| Gross Profit (GP) Percentage |
Directly ties advisor compensation to dealership profitability. |
| Customer Survey Index (CSI) Bonuses |
Common metric for rewarding customer satisfaction. Caution: Overweighting CSI can be unfair due to factors outside advisor control (e.g., “volatile CSE bonus” tied to negative surveys). |
| Effective Labor Rate (ELR) & Hours per RO |
Caution: These metrics may discourage advisors from quick, low-value jobs. |
| Spiffs & Service Bonuses |
|
| Quality of Repair Orders (ROs) |
Bonuses for accurate, audit-proof ROs.
|
| Team/Group Pay Plans |
Shared pay based on total shop gross. Build teamwork but may dilute individual performance. |
| Internal (Recon) Advisors |
Often paid hourly instead of commission. Roles often include warranty clerk, dispatcher, lot attendant, or vehicle inventory clerk. Caution: Commission on internal work can incentivize higher recon costs, conflicting with dealership goals. |
Remember that high performance depends not just on pay but also reducing lost revenue.
When a plan is “more than half a page”, it’s felt to be designed to confuse and even underpay advisors. Advisors have labeled these plans as “unnecessarily convoluted” and “designed to keep you underpaid or in the dark”.
Compensation based on hourly or salary alone without performance reward will not make employees work harder or produce more.
To base significant amounts of compensation on things totally outside an advisor’s control is demotivating and in many people’s minds will be perceived to be unfair, such as bonuses that are in large part outside their control.
Holding an advisor’s commission in reserve to make projections which are not transparent or impossible is a red flag, as it may be tweaked whenever making it harder for advisors to meet sales targets.
Charge-backing the cost or issues attributed to manager errors (e.g., missed signatures, manufacturer inspections) to the advisor is distressing and needs to be eliminated.
Make sure the total potential gross profit of the service department is substantial enough to support the amount of advisors and their compensation package. If the shop’s gross is not high enough for the amount of advisors, all of them will feel underpaid. For instance, a shop with less than $100,000 gross every two weeks with six advisors can feel like it doesn't have enough meat on the bone for everyone.
Pay plans that are inconsistent with where you want to go, such as tiered spiffs where the representative receives less money for performing better, does not make sense and needs to be discontinued.
According to industry expert Cecil Bullard, before you can create a pay plan, you MUST know your numbers.
List all fixed monthly expenses, including salaries of managers. Add all these costs together and divide by 0.25 (giving the assumption that fixed costs should equal 25% of total sales) to arrive at your monthly “nut” (the lowest revenue level that must be met to cover costs).
$23,500 fixed expenses (i.e., $8,000 management salary, $5,000 rent, $2,200 utilities, etc.) / 0.25 = $94,000 monthly nut.
If operating 5 days a week, the daily nut is $4,477.
Determine the rate you must charge per hour to generate enough to pay for technicians and desired profit margins. For instance, if you must pay a tech $36 an hour, you may have to charge $117 an hour (or $142.68 an hour if efficiency is 82%).
Apply your effective labor rate (actual dollars received per billed hour) to calculate any loss of revenue. For instance, if you need $117.00 per hour but collect only $85.74, you are losing $31.26 per hour.
What do you want your advisors to accomplish? Target overall sales, gross margin dollars, and CSI scores. Build bonus schedules with clear tiers and targets.
Sample weekly plan for an SA with a $15 minimum per clock hour ($600 weekly for 40 hours) consisted of weekly bonuses for $100 for sales of $8,000-$12,499, $200 for sales of $12,500-$14,999, and $300 for sales of more than $15,000. Bonuses are reduced by a quarter if margin was below 55% or CSI was below 95%.
Individual bonuses promote individual achievement, and team bonuses promote team efforts towards company shop goals.
Instant weekly bonuses give feedback, whereas monthly bonuses give cover for the business against manipulation.
As a reference, here’s how much a first-year service advisor in a high-volume dealership can earn.
Factors like dealership brand (e.g., Hyundai will compensate less than Mercedes or Porsche for advisers), volume, and geographical location heavily influence earning potential.
First-year advisors typically earn between $50,000 to $75,000 annually, some exceeding $100,000.
A first-year advisor at GMC/Buick working 4x10s was estimated to make $110,000 by posting $1.187 million in gross parts and labor.
Another advisors made $52,000 in his first year, and an express advisor at a high-volume VW store in Austin made roughly $72,000.
Some even report they made $100,000 in their first 10 months at a Mercedes store.
Experienced advisors (5+ years) will make $80,000 - $150,000, and high-volume or luxury dealerships’ top performers will make well over $200,000 a year.
An 11-year veteran advisor made between $120,000 and $150,000 per year, while a 20+ year veteran service advisor at a Mercedes store made $215,000.
Others made $100,000 after 14 years at a high-volume Toyota store. Highest earners make $200,000+ and some even make $250,000+ in Northern California.
Dealership directors and service managers can create profitable pay plans that encourage service advisors, increase customer satisfaction, and drive the profitability of the service department as a whole.
Remember, a functional pay plan preserves margins, makes employees more content, and ultimately makes managing easier.
A good pay plan keeps advisors motivated, increases retention, and aligns advisors’ performance with dealership profitability. It rewards advisors for their performance while helping the dealership save margins and maintain high customer satisfaction.
Hourly/Salary + Bonus: Provides stability with incentives based on performance. On the other hand, commission-Based (Partial or Full): Remits advisors directly on sales or production. Often incorporates a monthly guarantee or draw to provide stability.
New advisors: $50,000–$75,000 annually, occasionally more than $100,000.
Experienced advisors (5+ years of experience): $80,000–$150,000.
Top producers at high-volume/luxury dealerships: $200,000+ annually.
ELR & Hours per RO: Efficiency- and productivity-based incentives.
Spiffs: Low cash spiffs for the sale of individual services (flushes, tires, alignments, etc.).
Quality of ROs: Incentives for proper, audit-proof repair orders.
Team/Group Pay: Paid collectively based on overall shop performance.
Internal Advisors: Typically hourly with lower bonuses tied to vehicle sales or manufacturer targets.