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I never had any complaints working flat rate (Decembers sucked a lot of times though), or paying it when I hired someone.
For me it always seemed to even out, you beat the book in a lot of cases, but then had a run of the ones that fight you every step.
As Mike points out ".........he fixed his come backs, and if he broke anything (like the windshield putting the hood on) he paid 1/2 of that......" the system also holds the mechanic responsible for his work. For a shop owner that is a very big plus.
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All very good points on Flat rate, some I had not thought of. My autoshop teacher is pro flat rate, but he worked in the metropolitian area ( NYC ), at dealerships and his own shops, and he got/ used flat rate at his shops, so in that kind of place it would be good because there is always cars coming in, but a local shop even dealership in a small town ( got a couple small dealerships around here ) would be less than good for the tech.