A labour rate borrowed from the garage down the road tells you nothing about whether it covers your own wages, premises, equipment and non-billable time.
A useful review starts with the garage’s actual accounts and time records. It produces a working rate and a list of assumptions that can be checked, rather than a national “average” presented without evidence.
This is a management framework, not accounting, payroll or pricing advice. Use current figures from your accountant and payroll records.
Define the cost base
Agree which costs the labour rate needs to recover. Common categories include:
- gross technician pay
- employer payroll costs and benefits
- paid leave and training
- workwear and workshop consumables
- rent, rates, insurance and utilities
- equipment finance, calibration and maintenance
- software and professional fees
- reception and management overhead not recovered elsewhere
Avoid counting the same overhead in both labour and parts-margin calculations unless that is an intentional model. Document the allocation method so future reviews use the same basis.
Use productive hours, not paid hours
Paid attendance includes time that cannot be invoiced directly, such as training, leave, workshop maintenance, waiting, internal work and legitimate administration.
Calculate productive capacity from the garage’s own history:
- Start with paid technician hours for the review period.
- Remove leave and other unavailable time.
- Identify time recorded to customer jobs.
- Separate billable work from warranty, rework and internal tasks.
- Investigate missing or overlapping clock records.
Do not choose a utilisation percentage because an article says it is normal. The actual result may expose a workflow problem, incomplete time recording or a genuine characteristic of the work mix.
Motorworks technician time controls retain job time, kiosk events and audited corrections for review.
Calculate a cost per productive hour
Use a simple model:
productive labour cost per hour = relevant staffing cost / verified productive hours
Then allocate the agreed overhead:
overhead per productive hour = allocated overhead / verified productive hours
The combined amount is a cost-recovery floor under that model. It is not automatically the final customer price. The garage still needs to consider desired return, service mix, market position, risk and whether some overhead is recovered through parts or fixed-price services.
Have the accountant check the inputs and treatment. Small changes to productive hours can materially change the result.
Compare charge-out rate with effective recovery
The published labour rate is not necessarily the amount recovered.
For a consistent period, compare:
- labour value quoted
- technician time recorded
- labour value invoiced
- labour credits or discounts
- unbilled diagnostic or additional time
An effective recovered rate can be expressed as:
net invoiced labour / relevant recorded job hours
State whether the calculation includes VAT and how it handles fixed-price jobs, apprentices, multiple technicians and subcontracted labour. Otherwise two managers can produce different answers from the same month.
Motorworks reports let managers trace labour, time and recorded job profit back to the source work. The weekly garage reports guide provides a review routine.
Review work that runs beyond approval
A recovery gap can be a pricing problem, but it can also be an authorisation problem. If diagnostic or repair work reaches the agreed limit, stop and obtain approval before continuing where appropriate.
Keep:
- original quote or diagnostic limit
- additional finding
- revised price or calculation basis
- customer decision
- final time and invoice line
The quotes and customer-authorisation guide explains the handoff. Raising the hourly rate will not fix work that is repeatedly performed but never added to the approved job.
Separate rate from fixed-price operations
Many workshops sell repeatable services at a fixed customer price. Review those operations using:
- standard labour allowance
- actual median recorded time from comparable completed jobs
- parts and consumables
- rework or warranty history
- discounts and VAT treatment
If the job regularly takes longer than the allowance, decide whether the process, template, price or scope needs to change. Do not hide the difference by deleting time entries.
Use location-specific inputs where needed
Multi-location businesses may have different premises cost, staffing mix and service demand. A single rate can be simple for customers, but management should still understand how each location performs under it.
Motorworks supports location-specific labour settings and location-scoped reporting. Confirm that each report uses the selected location consistently before comparing sites.
Review changes with a reproducible record
For every rate review, retain:
- period used
- cost categories and source
- productive-hour calculation
- overhead allocation method
- current rate and effective recovered rate
- proposed rate or process change
- approval date and person
- date the new setting takes effect
This turns the next review into an update rather than a fresh argument about how the old number was chosen.
Improve the record before changing the price
If time, parts or invoice data are incomplete, first run a short clean measurement period. Ask technicians to record job time consistently, require additional-work approval and make sure completed labour reaches the invoice.
Then review the result with the accountant. A precise formula built on missing source records is still unreliable.
Motorworks connects job cards, technician time, quotes, invoices and recorded profitability. Book a demo to test how a labour operation moves through the system and how the report traces back to the job.
Method reviewed on 2 September 2026. Use current payroll, tax and accounting figures supplied or confirmed by qualified advisers.
