Salaries & Benefits
In today's competitive market place, "knowing your numbers" is critical. Understand-ing your business cost can help you make the right decisions when it comes to setting labor rates, billing customers properly and paying a competitive wage
The subject of money tends to be one of the most sensitive topics in our society. In most situations, it's the most impolite question ever. Most decent Americans are embarrassed to ask it. And yet, like rubbernecking at an accident on the highway, we're drawn to know: How much do you make?
At trade shows, industry meetings and via casual conversation, talk inevitably turns to the subject of finding good help. Managers and owners insist they can't find machinists who are willing to do the work and capable of being trained. On the other hand, machinists often complain that they don't get paid enough to do the work and are not provided the equipment necessary to be productive. Obviously, where you stand on the corporate ladder changes your view, so we asked the crack Market Research Department at Babcox Publications to find out details about the compensation packages offered to today's managers, machinists and other shop personnel.
Using an exciting new tool as well as a tried-and-true method, we offered Engine Builder readers and AERA members a chance to participate in this survey. There were over 370 responses through a combination of emails and faxes inviting them to answer the questionnaire online.
We asked a variety of questions pertaining to number of employees, size of the business trading area, how employees are paid, how many hours they typically work and what benefits they are offered. Where possible, those results are broken down by region. In many cases, according to Bob Roberts, Market Research Manager for Babcox Research, these regional differences were very clear - but in other cases, they were less well defined.
In this feature we also add some information gathered for our Machine Shop Market Profile. The complete Part 2 of the annual report, which examines financial data, size of the shop, years in business, employee information and customer base analysis of the typical custom engine builder (CER), is available exclusively at the Engine Builder Web site, www.engine-builder.com.
Nationally, our survey shows that 47% of shops have a manager (we would assume that the other 53% are managed by the owner), 79% have at least one machinist (again, assuming that 21% are one-man operations), 47% have a parts person/salesperson, and 57% of shops have some sort of dedicated office clerical person.
According to our Machine Shop Market Profile, the national average for the number of years a shop has been in business is 25.7 years. The largest percentage of shop owners (about 28%) indicated they have been in business between 16 and 25 years. Collectively, 21% of shops have been in business for 10 years or fewer; 5.7% of all shops have been in business for between 11 and 15 yeas; and more than 46% of shops have been in operation for more than 26 years.
The average shop has 5.3 employees, with the average number of machinists in the shop being 3. The average number of years the typical machinist has been employed at one location is 13 years.
Of course, "average" may not describe your shop in every case. The "average" for a particular statistical response is the result of adding all of the responses for that item from all of the respondents and then dividing that number by the total number of responses. The "median" is the result of ranking all of the survey responses from highest to lowest and then finding the number that falls right in the middle.
Our survey shows that some shops employ multiple personnel in various job responsibilities. In the case of multiple machinists, for example, the typical "senior" machinist has an average of 18.4 years service. The typical "junior" machinist has 7.8 years under his or her belt.
Size of shop, predictably, was heavily skewed to the smaller size. But when we asked participants about the size of their trading area, things were a little more equal. The largest percentage, 30% of respondents say their shop is in a medium city (population of 100,000-499,999). The small city crowd (population 15,000-99,999) represents a similar 29%. Big city (population of 500,000 or more) businesses account for 21% of our respondents, while 20% say they are in township or rural areas (population less than 15,000).
The national average shop hourly labor rate charged by the company was $65.70 when shops from all regions of the country are figured in. However, there are distinct differences in the hourly rate when examined regionally. The lowest hourly rates are found in the East South Central region of the country ($53.90 per hour) and the West North Central region ($59.00 per hour); the highest rates, not surprisingly, are charged on the West Coast ($75.80 per hour).
Interestingly, the number of hours in a typical machinist's workweek was inversely proportional to the shop's labor rates. The typical machinist works 40.7 hours per week in the Pacific region but 43.2 hours per week in the East South Central. Still, despite the much shorter workweek, the potential billable labor is vastly greater in the Pacific. Shops could bill $3,085.06 per employee per week in California, Washington and Oregon, while shops in Kentucky, Tennessee, Mississippi and Alabama could potentially bill just $2,328.48. Of course, the potential billing and actual billing are never the same, because no employee will be 100% efficient in billable work.
More than half of the machinists are paid hourly, according to our survey, while 26% are salaried employees. Managers are overwhelmingly salaried (70%) versus paid hourly (15.4%). Parts/Sales employees are almost as likely to be salaried employees (38%) as hourly (42%). Other payment responses included flat rate, percentage of labor, percentage of parts or a combination.
More than half of machinists (58%) get overtime if hours are exceed, according to survey respondents.
While it would have been interesting to determine average yearly earnings by region, this was impossible due to the wide range of pay scales within each economic region. However, the typical national yearly earnings for the most experienced and least experienced employees are as follows:
Most experienced managers: $48,619
Least experienced managers: $34,114
Most experienced machinists: $39,917
Least experienced machinists: $25,820
Most experienced parts/sales person: $36,607
Least experienced parts/sales person: $24,572
Remember, this is the average earnings, and "how much you make" can be strongly influenced by other factors. Staying in business requires meeting customer expectations - and shop owners usually say meeting those demands is only possible with the right resources. Of course top-notch equipment helps, but finding and keeping valuable employees is often cited as one of the biggest challenges today.
For many engine rebuilding and machine shop employees, benefits are as important as salary. When we asked shop owners what kinds of benefits they provide to their employees, here are their responses (numbers indicate percentage of respondents who provide such a benefit).
Paid vacation: 78%
Work clothes: 74%
Hand tools: 63%
Training or education: 43%
End of year bonuses: 30%
Major medical: 48%
Life insurance: 28%
Pension plan: 26%
Disability insurance: 24%
Profit sharing plan: 17%
Dental care: 22%
Multiple bonuses throughout the year: 13%
Vision care: 7%
Only 7% of respondents say they offer no benefits of any kind.
Because not all machine shops build engines and not all engine builders actually do machining (nor are very many 100% one way or the other), we asked shop owners what percentage of their shop volume is machining and what percentage is assembly. The national split is 64% machining and 36% assembly. These totals vary somewhat regionally, but on the whole we can determine that about two-thirds of the typical shop's day is spent machining parts.
We thank all of the shops that participated in this survey and invite you to submit your email address to us to be placed on the list to be contacted for future Engine Builder