How to Pay Your Technicians: Commission vs. Hourly vs. Flat Rate

The median HVAC technician wage is $59,810 per year according to May 2024 BLS data - but your best tech could be generating $500,000 or more in annual revenue for your shop. If you are paying that person a flat hourly wage with no performance layer, you are leaving serious money on the table and so are they.

Your pay structure is not just a compensation decision. It is a retention tool, a productivity driver, and a direct line to your profit margin.

What Is the Right Benchmark for Technician Pay as a Percent of Revenue?

Start here before you touch anything else.

Technicians should earn between 14% and 20% of the revenue they generate for your company. That comes from SBE Odyssey, an HVAC business coaching firm that has trained over 1,000 service technicians, published in their September 2024 benchmark report.

The average HVAC tech generates between $250,000 and $450,000 in annual revenue. At a 14% pay rate, that puts take-home somewhere between $35,000 and $63,000. At 20%, you are looking at $50,000 to $90,000.

A tech generating $1,000,000 a year - which SBE Odyssey has documented at their highest-performing client shops - earns around $140,000. Their top trained technicians have cleared $200,000 in personal income while producing over $2,000,000 in annual sales.

Those numbers change how you think about comp.

Commission vs. Hourly vs. Flat Rate: How Do They Actually Compare?

Pay Structure	Productivity Incentive	Income Predictability	Admin Complexity	Best For
Hourly Only	None	High	Low	Entry-level or apprentice techs
Commission Only	High	Low	Medium	Experienced sales-focused techs
Flat Rate	High	Medium	Medium	Mid to senior techs on service calls
Base + Commission	High	Medium-High	Medium	Residential service techs
Base + Tiered Bonus	Highest	High	Higher	High-volume shops with mixed skill levels

Each structure has a real cost. Pick the wrong one and you either burn out your top earner or you babysit a guy making $30 an hour to watch YouTube in the driveway between calls.

What Happens When You Pay Hourly Only?

One word: coasting.

A shop owner posting on Diagnostic Network (diag.net) - a trade forum for professional technicians and shop owners - described his own situation plainly. His technicians were running at about 50% efficiency. The industry average is 70%. The reason he identified was a direct quote from one of his own techs: “I get paid the same amount no matter how hard I work, so why bust my butt?”

Hourly pay gives zero reason to close faster, upsell a maintenance agreement, or hustle on the fourth call of the day. You are literally paying for time, not output.

That inefficiency has a revenue cost. If a tech running five calls a day could run seven - which ServiceTitan notes some high-performers achieve - and the average plumbing ticket is $315 per call, that is $630 in daily revenue you are leaving behind per technician, every single day.

If you are scaling your team and struggling with productivity gaps, the technician turnover cost article breaks down exactly what a disengaged tech costs you beyond the paycheck.

What Are the Real Risks of Commission-Only Pay?

A senior HVAC technician on HVAC-Talk.com described working a straight percentage-of-call commission plan with no base: “Some days I made $30 for a 12-hour day, others I’d make over $1,500 for an 8-hour day.”

That kind of variance is brutal for a tech with a mortgage and kids. And when income is unpredictable, your best techs start taking calls from your competitors who offer stability.

The same thread surfaced another real problem. That senior tech said his main issue was being pushed further and further into a sales role when he went to school to be a great technician - not a great salesman. If your comp plan turns your diagnostic tech into a quota-chasing closer, expect resentment and turnover.

Commission rates for HVAC techs generally range from 4% to 8% of the call, and up to 12% in tiered structures - according to ServiceTitan’s blog citing HVAC-Talk industry data, published August 2025. Tiered structures pay a lower rate up to a revenue threshold, then step up. For example: 3% on sales up to $10,000, 5% between $10,000 and $20,000.

That structure rewards volume without blowing your labor cost ratio on your highest earners.

What Does a Base Plus Bonus Structure Actually Look Like?

Cecil Bullard, founder and CEO of The Institute for Automotive Business Excellence in Ogden, Utah - a veteran who has run multiple successful shops - laid out a specific framework in Ratchet+Wrench magazine in January 2024.

His model: 60% of the available pay goes to the technician as a guaranteed hourly base. 40% is structured as a performance bonus.

His example used a B-tech starting at $30 an hour. That tech gets $1,200 a week guaranteed for 40 hours regardless of output. Then there is a bonus layer tied to productivity, continuing education, and comeback rate. He described the bonus adding up to an additional $12 an hour when all three targets are hit.

A shop owner on Diagnostic Network who had run his own shop for four years shared a similar framework he was building toward: hourly base plus a tiered commission starting at 5% of labor at 50% productivity, stepping up to 10% at 75% productivity.

That kind of graduated structure gives new techs income stability while giving your veterans a real reason to push.

If you are trying to scale from a solo operator to a full team, your pay structure is one of the first systems you need locked in before you add headcount.

What Should Labor Cost as a Percent of Revenue?

The industry standard is 25% of labor revenue collected. That comes from Shop Owner Magazine, citing Vic Tarasik - founder of Shop Owner Coach with 30-plus years in the trades - published October 2024.

In a flat rate or performance-based structure, compensation ranges from 23% to 27% depending on the technician’s productivity and skill level. Your highest performers may push past 27%. Your newer techs will fall below 23%. The mix averages out to 25% across the team.

If you are above 30% on a single technician, either that tech is not generating enough revenue or your pricing is off.

The BLS reports that wages across HVAC, electrical, and plumbing trades rose about 3.5% nationally in 2024 - outpacing the Consumer Price Index increase of 2.9% for the same period, according to ServiceTitan’s salary guide using Payscale data from 1,550 organizations. Entry-level HVAC techs at the national median are earning $54,100. Intermediate techs with two to four years of experience land at $65,700. Senior techs with four to seven years are at $77,200.

You are not going to hold a $77,000 tech on a flat $35 hourly rate with no upside. Those techs have options.

What Does the Labor Shortage Mean for How You Pay?

HVAC faces an estimated 110,000 technician shortage right now. Plumbing could see a shortfall of 550,000 workers by 2027. Those numbers come from FieldEdge’s HVAC and Plumbing Industry Outlook 2026 report, published February 2026.

ServiceTitan principal advisors noted publicly that “the technician pool is going to tighten up a lot” - and not just in HVAC, but across all trades, partly because the oil, gas, and automotive industries are expanding and pulling from the same pool of mechanically inclined field workers.

When supply tightens, your pay structure becomes a recruiting ad. A flat hourly with no upside is a hard sell to a candidate who already has two other offers.

Contractors we have worked with across dozens of accounts report that the single fastest way to lose a mid-career tech is to have no visible path to higher earnings. A tiered commission or bonus structure gives that tech a roadmap, not just a paycheck.

You also need to be thinking about lead flow when you add staff. More techs doing more calls means you need more technician-generated leads and same-day booking capacity to keep everyone productive.

How Do You Know If Your Current Pay Structure Is Working?

Run this number right now.

Take what you paid each tech last year - salary plus all commissions and bonuses - and divide it by the revenue they generated. If the result is above 20%, your structure is costing you margin. If it is below 14%, you are underpaying and probably about to lose that person.

The average HVAC tech generates approximately $200 per call, running between three and five calls a day. A tech doing five calls, five days a week, 50 weeks a year touches around $250,000 in revenue. At 14%, their total comp target is $35,000. At 20%, it is $50,000.

If your pricing is right, your close rate is decent, and your booking rate is near the ServiceTitan benchmark of 42%, those numbers should work. If your website traffic is not converting into booked jobs, that is a separate problem entirely - and it directly caps how much revenue each tech can realistically generate. The website traffic not converting breakdown is worth reading if your call volume feels soft.

Frequently Asked Questions

What commission rate should I pay my HVAC technicians?

According to ServiceTitan’s blog citing HVAC-Talk industry data from August 2025, commission rates for HVAC technicians typically range from 4% to 8% per call, and up to 12% in tiered structures. Tiered models - where the rate increases after hitting a revenue threshold - reward high-volume techs without inflating your average labor cost across the team.

How much revenue should a single HVAC technician generate per year?

SBE Odyssey’s September 2024 benchmark report places average tech revenue between $250,000 and $450,000 annually. Their highest-performing trained technicians have generated over $2,000,000 in annual sales while earning $200,000 or more in total compensation.

What is the industry standard for labor cost as a percentage of revenue?

The benchmark is 25% of labor revenue collected, excluding benefits, according to Shop Owner Magazine citing Vic Tarasik of Shop Owner Coach, published October 2024. In performance-based flat rate structures, the range runs from 23% to 27% depending on individual technician productivity, with the team average landing at 25%.

Is flat rate pay better than hourly for technicians?

Flat rate and performance-based structures produce higher technician efficiency. Shops with hourly-only pay average around 50% tech efficiency compared to an industry standard of 70%, based on data from the Diagnostic Network trade forum. The productivity gap directly reduces revenue potential without reducing your labor cost.

How do I keep my best technicians from leaving for competitors?

Technicians in the $77,200 median salary range for experienced HVAC workers - per Payscale data from 1,550 organizations, published by ServiceTitan in June 2025 - have leverage in a market facing an estimated 110,000-tech shortage. A clear tiered bonus structure tied to productivity, education, and quality metrics gives them a reason to stay and a visible path to higher earnings.

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Pull your revenue-per-tech number for last year. If any technician is above 20% of their generated revenue in total comp, or below 14%, your pay structure needs a rebuild before you hire the next person. Start with the 60/40 base-to-bonus framework and build your tiers from there.