Technician Pay Structure: Why Raising Hourly Wages Won't Keep Your Best Trades Workers

A plumbing and HVAC shop owner called me last year, rattled: his best service technician had just given notice and walked to a competitor across town for two dollars more an hour. His plan was simple. Match the offer, add a dollar, make the problem disappear. Before he picked up the phone I told him the raise would not hold, because his technician pay structure was the real reason his top people kept leaving, not the wage. He had the structure exactly backward. It punished his fastest workers and protected his slowest, and no hourly bump fixes that.

That is the most common conversation I have with trades owners in the $2M to $10M range. They are convinced they have a wage problem. They almost always have a structure problem. The owner who called me had lost three producers that year, every one of them a top performer, while the two slowest guys on the roster had never once threatened to leave. When your pay plan only motivates the people you would be fine losing, the number on the check is not the issue.

Trades owners are losing this fight at scale. HVAC turnover ran 16 percent over the trailing year, plumbing 18 percent, and electrical 21 percent, with average tenure under four years in all three, according to ServiceTitan’s State of the Trades data through January 2026. Replacing one service tech is not cheap: recruiters who place field techs put the fully loaded cost of losing a roughly $55,000 technician at $55,000 to $110,000 and up once you count lost production, overtime coverage, recruiting, and the months before a replacement bills at full speed. Every top producer who walks is a six-figure hole, and the owner who called me had dug three.

The Raise That Never Fixes Anything

Here is the uncomfortable finding. Techs mostly do not quit over pay. The firm that placed the retention research I trust found that poor management is the number one driver of trades departures, and states it flatly: techs do not quit over pay, they quit over how they are managed. Pay only becomes the reason when it has fallen clearly below the local market. That tracks with what Gallup has measured across every industry: managers account for at least 70 percent of the variance in team engagement, per its State of the American Manager research. The paycheck is rarely the thing. The seat, the clarity, and the person they answer to are the thing.

So when an owner responds to a resignation with a reactive raise, two things happen. The tech takes the money and leaves within the year anyway, because the raise did not touch what actually drove him out. And every other tech learns that the way to get paid here is to threaten to quit. You just taught your whole crew the wrong lesson and spent money to do it.

A pay structure is not a bribe to make people stay. It is a system that tells every technician exactly what the company rewards. If yours rewards nothing in particular, your best people feel it first, because they are the ones carrying the shop and watching the guy next to them collect the same hourly rate for half the output.

What Your Pay Plan Is Actually For

In the Business Operating System I run with trades clients, pay sits at the intersection of two components: People and Data. People means right person, right seat: the tech wants the work, has the skill, and fits how your shop operates. Data means you can see each person’s output in numbers, not vibes. A pay structure is where those two meet. It converts the measurables you already track, or should be tracking, into what a technician earns.

That is the mental shift. Stop asking “what hourly rate keeps this guy from leaving” and start asking “what does this plan pay my best producer to do more of.” Those are completely different questions, and only the second one builds a shop that scales past the owner. When I document how work gets costed and measured for a client, I build those numbers inside Ninety.io, the platform I use to run the Scorecard and the accountability chart, so each tech’s leading numbers are visible every week rather than discovered at review time. Pay tied to numbers nobody can see is just a salary with extra paperwork.

The Five Ways Shops Pay Techs, and Where Each One Breaks

There are really only five structures in this trade, and each one fails in a predictable spot.

Straight hourly. Simple, predictable, low legal risk, and the right call for apprentices and install-heavy work. Its flaw is that it pays for presence, not production. Your fastest diagnostician earns the same as your slowest, so the fast one eventually leaves for a shop that pays for speed.

Hourly plus spiff. You bolt a bonus onto one behavior: service agreements sold, financing offered, air-quality add-ons. It changes that one behavior fast. The catch is that techs optimize the spiffed item and quietly drop everything else you did not put a bounty on.

Performance pay, also called flat rate or billed hours. The tech earns a share of the billed labor on completed work, so a fast, skilled person earns more without costing you more per job. This is where top residential techs clear real money. It only works with an accurate price book and real quality control, because the same incentive that rewards speed can reward cutting corners if nobody is inspecting the work.

Percentage of revenue. Easy to calculate and a trap. A tech paid on revenue is paid to discount. Drop a price 10 percent to close the sale and the tech loses 10 percent of commission while the company can lose roughly 25 percent of the gross profit on that job. You have hired your own sales force to erode your margin.

Hybrid base plus commission. A guaranteed hourly base that carries the tech through slow season, plus commission calculated on gross profit above a threshold. Most well-run service shops land here eventually, because it protects the person in February and rewards production in July. The non-negotiable detail: commission comes off gross profit, never revenue, so the tech is never paid to discount.

One test cuts through all of it. If a technician cannot calculate his own check in his head, the plan does not motivate him. It just confuses him.

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Build the Plan Around Numbers, Not Mood

Whatever structure you pick, anchor it to three or four measurables you can pull every week, not a gut read at year end. For a service tech, I usually land on billable hour efficiency, average ticket, callback rate, and a quality or review score. Billable efficiency rewards the speed you want. Average ticket rewards diagnosing the whole problem instead of the one symptom. Callback rate and the quality score keep the speed honest, so nobody games the plan by rushing out of a job that comes back in a week.

Then write it down. In the operating system I use, that becomes an agreement: the tech knows the exact numbers, the exact percentages, and the threshold where commission kicks in, and those numbers show up on the weekly Scorecard where he can see his own trend. Clarity is half the retention battle. Most techs do not distrust the plan because it is stingy. They distrust it because it is fuzzy, discretionary, and seems to change whenever the owner is in a bad mood. A number on a page that both of you agreed to removes that friction entirely.

One warning on the national wage benchmarks before you set your base. The median HVAC tech earned $61,010 in May 2025, with the top 10 percent above $95,210, per the Bureau of Labor Statistics Occupational Outlook Handbook. Those are national medians, not your market, and in a trade short roughly 349,000 workers in 2026 by industry estimates, your local rate for a proven producer is almost certainly higher. Pay the base to market. Let the structure, not the base, be where your best people pull ahead.

What We Actually Did

Back to the owner who wanted to throw a dollar at the problem. We did not match the counteroffer. The tech left, and that was the right outcome, because the broken structure would have lost him again in eight months anyway. What we rebuilt was the plan underneath.

We moved his service techs from flat hourly to a hybrid: a fair market base so nobody starved in the shoulder season, plus commission on gross profit above a monthly threshold, with four measurables living on a weekly Scorecard. We rewrote the pay plan as a one-page agreement every tech signed, so the math was theirs to run. We also did the unglamorous half of the work, because the retention research was right that management was the real leak. The owner started a real weekly team huddle and monthly one-on-ones instead of only talking to his techs when something broke.

Inside two quarters his average ticket rose, his best remaining tech stopped asking about the competitor, and the next strong hire took the job specifically because the pay plan was written down and he could see exactly how to earn more. The owner did not spend more on wages overall. He spent it differently, and on the right people.

Signs Your Pay Structure Is Driving Off the Wrong People

Run your shop against this list honestly.

Your fastest, most skilled tech earns within a dollar an hour of your slowest.
Your only lever when someone resigns is a reactive raise.
A tech cannot tell you, without a calculator, how this week’s work affects his check.
Pay decisions feel discretionary, and the crew suspects favoritism.
You pay commission on revenue, so your techs discount to close.
The last three people who quit were among your best, not your worst.
You have no weekly number that tells you who is actually producing.

Two or more of those and the problem is the structure, not the market rate. Another raise will just cost you money on the way to the same resignation letter.

Where to Start

Do not redesign everything this month. Pick one measurable you can already pull, billable efficiency or average ticket, post it weekly where your techs can see their own trend, and talk about it in a short team huddle. That one move starts shifting the conversation from presence to production without touching a single pay rate. Once the number is visible and trusted, you have the foundation to layer a real structure on top of it. If you want a second set of eyes on whether your plan is rewarding the right behavior or quietly funding your own turnover, let’s talk it through.

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