Commission and performance pay for service techs

Why owners move to commission pay

Labor is the largest cost a service business controls. Average hourly earnings of production and nonsupervisory employees at specialty trade contractors reached $39.05 in September 2026, up 4.7% on a year earlier^[5]. On top of wages, benefits made up 30.0% of private employers' total compensation costs in June 2026^[6]. When labor costs rise that fast, owners look for pay plans where cost rises with revenue rather than with hours.

Commission plans can do that. They can also create the wrong incentives. A tech who earns more by selling a replacement than by repairing a part has a reason to recommend replacement. Customers notice, reviews follow, and the company pays for it in lost trust. The goal is a plan that rewards skill, speed and good sales conversations without rewarding overselling.

Benchmarks to test every plan against

The median hourly pay for HVAC mechanics and installers was $29.33 in May 2025 and $30.38 for electricians^[1][2]. These are medians across the whole occupation, so a senior tech in a high-cost metro will expect more. Use them as the floor test: in an average week, a tech under your commission plan should earn at least what the median hourly rate would pay for the same hours. If they do not, the plan will push people out.

Local pay matters more than national medians. Before finalizing a plan, compare it with the pay ranges in current ads for service techs within your area, and note what each competitor includes: vehicle, tools allowance, on-call pay, training and benefits. A commission plan that pays above the median nationally may still lose techs if a local competitor offers a higher base with a company truck. The specialty trade average below is another reference point, because it reflects what contractors across the trades are paying now.

Five plan types and where they fit

Guardrails against overselling

• Pay commission on completed and collected work, not on estimates or signed proposals.
• Pay the same percentage on repairs and replacements, so the recommendation is driven by the equipment, not the commission rate.
• Claw back commission on callbacks within a set window, and pay a small bonus for a clean callback record.
• Review a sample of replacement recommendations each month, with photos and readings, and coach techs whose rates are far above the team.
• Track customer complaints and refunds by tech and make them part of any bonus.
• Pay for tech-generated leads only when the customer buys from a salesperson after a fair conversation, not for every referral.

Spiffs that do not backfire

Spiffs are small, fixed payments for a specific result, such as selling a maintenance membership or a surge protector. They are quick to launch and easy for techs to understand, which is why so many companies start with them. They also go wrong in predictable ways. A large spiff on one product pushes techs to mention that product on every call, whether it fits or not. A spiff that changes every month teaches techs to wait for the next promotion. A spiff paid on signed agreements rather than paid ones rewards a tech for a sale the customer cancels a week later.

• Keep spiffs small relative to base pay and commission, so they nudge rather than drive behavior.
• Pay spiffs for products that solve a problem the tech found and recorded, with a photo or reading.
• Pay after the customer’s first payment clears, and claw back on early cancellations.
• Run each spiff for a whole season, not a few weeks, and review whether it changed results.
• Include every spiff in the weekly regular rate when the tech works overtime.

The overtime checks every plan needs

Overtime is owed for hours over 40 in a workweek at not less than one and a half times the regular rate, and the regular rate includes all pay for employment except certain exclusions, such as discretionary bonuses^[4]. The workweek is a fixed and regularly recurring 168-hour period, and averaging hours over two or more weeks is not permitted^[4]. A spiff or bonus announced in advance to encourage techs to work faster or more efficiently is not discretionary and is part of the regular rate^[3].

1. 01

   Total pay for the workweek

   Example: hourly pay of $1,260 for 42 hours at $30, plus $420 in commission and $100 in spiffs, totals $1,780.

2. 02

   Find the regular rate

   Example: $1,780 divided by 42 hours is about $42.38 an hour.

3. 03

   Calculate the premium

   Example: two overtime hours at half of $42.38 add about $42.38, for a total of about $1,822.38.

4. 04

   Check the minimum

   Confirm total straight-time pay divided by hours is above the applicable minimum wage, which matters most for commission-only plans.

The details, including how to handle commissions paid monthly, are in our guide to FLSA overtime for commissioned techs.

Designing the commission base

The base is what the percentage is applied to. Most disputes come from vague bases, so define it in writing.

• Revenue: the invoice total after discounts, before tax, collected within the pay period.
• Exclusions: equipment pass-through costs, permits, financing fees and refunds.
• Shared jobs: a written split when two techs work the same call, such as a lead and a helper.
• Warranty work: paid hourly, since there is no revenue to commission.
• Membership visits: paid hourly or a fixed amount per visit, so techs do not skip them for higher-paying calls.

Example: moving a service department to hybrid pay

In this example the owner also tracked three signals for the first six months: average ticket by tech, replacement recommendations as a share of diagnostic calls, and customer complaints. A tech whose replacement share rose sharply after the change would get a ride-along and a review of their recommendations, not a reprimand. The point is to catch drift early, before customers do.

Signs the plan is working

• Tech pay rises for the people you most want to keep, and nobody takes a cut for the same work.
• Callbacks and complaints stay flat or fall.
• Membership sign-ups rise without a jump in early cancellations.
• Techs ask fewer questions about their pay stubs after the first two months, which means they understand the plan.
• Turnover among your top performers falls over the following year.

Rolling out a new plan

1. Model the plan on twelve months of each tech's real tickets, including slow months.
2. Show each tech their before and after, and adjust so nobody takes a cut for the same work.
3. Run the plan in parallel for one month: pay under the old plan, show the new numbers on the stub.
4. Confirm the payroll system includes commission and spiffs in the weekly regular rate.
5. Review the first quarter for overselling signals: replacement rates, callbacks, complaints and refunds.
6. Revisit rates once a year, after the busy season, not in the middle of it.

Commission plans need a classification decision first: techs paid this way are almost always employees, not contractors. See W-2 vs. 1099 for service workers before you set anything up as a 1099 arrangement.