- A Pay Plan Is a Behavior You Are Buying
- The Five Structures, Compared Honestly
- What Technicians Earn — and What They Cost
- Free Technician Pay Plan Cost Calculator
- Why Paying on Revenue Pays Them to Discount
- The Overtime Rule That Wrecks Good Plans
- Guardrails and How to Roll It Out
- Frequently Asked Questions
A Pay Plan Is Not a Payroll Decision. It Is a Behavior You Are Buying.
Whatever you pay for, you get more of. Whatever you do not pay for quietly stops happening — and nobody tells you.
Most owners rewrite a pay plan when the numbers hurt. That is the wrong trigger. By then you are reacting to a symptom you created six months earlier.
Pay for hours and you buy hours. Pay for revenue and you buy revenue — including the revenue that costs you money. Pay for gross profit and you buy gross profit. Pay for agreements and you buy agreements, then find out in ninety days what stopped getting done to make room for them.
Do not start with "what should I pay?" Start with "what do I need my technicians doing differently on Tuesday?" Then build the plan that pays for exactly that.
Every structure below answers that question differently. None of them is right. One of them is right for you — right now, at your size, with the job costing you actually have.
The Four Jobs a Pay Plan Has to Do at Once
- Pay the technician enough to keep him off the job boards. Not generous. Competitive, and visible.
- Leave enough margin for the company to survive February. A plan that only works in July is not a plan.
- Reward the behavior you need — not the behavior that happens to be easiest to measure.
- Be simple enough that he can compute his own check before payday. This one is not optional.
If a technician cannot calculate it, it does not motivate him. It just makes him suspicious. A complicated plan he does not trust is worse than a simple plan he does — because now every payday is a negotiation, and you are the one who has to defend a spreadsheet he never asked for.
✔ Signs the Plan Is Working
- Technicians ask about the plan before the call, not after the check
- Average ticket and gross margin move together, not against each other
- Callbacks stay flat while production climbs
- Your best tech is your highest paid, and everybody knows why
- Nobody argues about payroll on Friday
✘ Signs It Is Quietly Failing
- Revenue is up, gross profit is not
- Callbacks climb every time production does
- Techs cherry-pick the board and fight over dispatch
- The spiffed item gets sold and the rest of the checklist dies
- You cannot explain a technician's check without opening a spreadsheet
Every HVAC Pay Plan Structure, Compared Honestly
There is no best one. There is the one that fits the size, the margin, and the maturity of your company today.
| Structure | What It Does Well | Where It Bites | Best Fit |
|---|---|---|---|
| Straight hourly | Simple, predictable, and the lowest legal exposure on this list. The technician always knows what he is making, and so do you. | Pays for presence, not production. Your best technician subsidizes your slowest one. Nothing in the plan rewards a bigger ticket, a cleaner callback rate, or a sold agreement. | Startups. Install-heavy shops. Apprentices. Any company whose job costing is not yet clean enough to trust with a commission. |
| Hourly plus spiff | Cheap, fast and surgical. Aim it at one behavior — agreements sold, IAQ, financing offered, photos uploaded — and you see movement inside a week. | Technicians optimize the spiffed item and quietly drop everything else. Watch what stops getting done. Spiffs are non-discretionary bonuses under the FLSA and must be folded back into the overtime rate. Most shops get this wrong. | Companies with a solid hourly base that need one specific behavior moved now. Also the safest first step away from straight hourly. |
| Performance pay (flat-rate / billed hours) | Ties earnings to produced work instead of clock time. An efficient technician earns more without costing you more per job. Rewards speed, completion and self-management. | Invites corner-cutting and callbacks when quality is not measured. Demands an accurate, defensible flat-rate book. A slow season guts take-home pay unless you guarantee a floor. Minimum wage and overtime still apply to every hour actually worked. | Mature service departments with a real price book, honest task times, and a callback metric somebody actually watches every week. |
| Percentage of revenue | Dead simple to explain and to calculate. Drives average ticket and urgency harder than anything else here. Technicians understand it instantly. | The dangerous one. A technician paid on revenue is paid to discount — the sale still pays him and the margin loss is entirely yours. It also pays commission on equipment cost, parts cost, permit fees and financing fees you never earned a dollar on. | Rarely the right long-term answer. Defensible only with a margin floor, a published non-commissionable list, and job costing you would show your banker. |
| Hybrid base plus commission | A guaranteed hourly base that protects the technician and keeps your overtime math clean, plus commission on gross profit above a threshold. Stability underneath, real upside on top. | More moving parts. Requires job costing you trust and a one-page explanation a technician can follow. Set the base too high and the upside stops motivating. Too low and you lose people in the slow season. | Most established residential service companies. This is where the majority of well-run shops eventually land, and it is worth building toward on purpose. |
There is no credible published benchmark for HVAC commission rates. Nearly every number in circulation traces back to a software vendor, a commission platform, or a coaching firm quoting its own material. Build yours from your own gross profit instead.
Take the gross profit a job actually produces. Decide what share of that gross profit the business can sustainably hand over and still fund overhead and net profit. Work backward to a percentage. That number is yours — and it is defensible.
What is verifiable: ACCA reported in June 2026 that 47% of HVACR contractors incentivize their technicians, and that doing so produced a 5% average ticket increase. Incentives work. The percentage still has to come out of your own numbers. Start with your real rate and margin →
What Technicians Earn — and What an Hour of Their Time Really Costs You
Know the floor before you write the offer. Know the burden before you write the plan.
That spread is the whole conversation. The gap between the bottom decile and the top decile is more than $50,000 a year in the same occupation. Your pay plan decides which end of that range your company recruits from — and which end it keeps.
ACCA reported in June 2026 that the national average technician wage runs about $33 per hour, ranging from roughly $28 in the Deep South to $38 in the Northeast. Use national data to sanity-check yourself, never to set your offer. The only number that matters is what the good technician down the road is being paid this week.
Read that as an operator. Roughly thirty cents of every compensation dollar in this industry is not wage. Apply the same ratio and a $30 hourly wage is closer to $43 an hour in total compensation — before you add commission, before the overtime premium that commission creates, before the truck, the phone, the tablet and the uniforms. Every pay plan you design has to be built on that number, not on the wage you quoted at the interview.
HVAC Technician Pay Plan Cost Calculator
Model your plan before you announce it. This shows the fully loaded weekly cost — including the overtime premium commission creates, which almost nobody budgets.
Technician Pay Plan Cost Calculator
How the overtime line works: commission and non-discretionary bonuses must be included in the regular rate, so every commissioned hour past 40 owes an additional half-time premium on the blended rate. That is the line most owners never budget and the one the Department of Labor collects on. This tool is a modeling aid, not legal advice — confirm your plan with an employment attorney. Everything runs in your browser; nothing is sent or stored.
Run your own plan through it and watch the last line. Fully loaded technician cost as a percentage of the revenue he produces is the single cleanest health check on a pay plan. If that number climbs while your gross margin falls, your plan is buying revenue and selling profit — and it will look fine on a revenue report right up until the year closes.
Leonard has spent 34+ years building, running, repairing, scaling and selling HVAC companies — starting his first from scratch in 1993 as the one man doing nearly everything. These systems were built under real pressure, with real payroll on the line. Not in a classroom.
Why Paying on Revenue Quietly Pays Your Technician to Discount
The math is short, it is brutal, and almost nobody shows it to owners before they sign the plan.
Here is a $1,000 repair at a 40% gross margin. The technician is on 8% of revenue. He needs the sale, so he knocks 10% off at the kitchen table.
| Scenario | Ticket | Company gross profit | Tech paid on revenue (8%) | Tech paid on gross profit (20%) |
|---|---|---|---|---|
| Full price | $1,000 | $400 | $80 | $80 |
| 10% discount to close | $900 | $300 | $72 | $60 |
| What the discount cost | −$100 | −25% | −$8 (−10%) | −$20 (−25%) |
Arithmetic illustration using a fixed $600 job cost. Not an industry benchmark — run it with your own margin.
A 10% discount costs the technician 10% of his commission. It costs the company 25% of its gross profit.
He is not being greedy. He is being rational. You built a plan where cutting your profit by a quarter costs him almost nothing — and then you got frustrated when he used it. Move the commission to gross profit and the pain becomes shared. Suddenly he is defending your price for his own reasons, which is the only kind of price defense that lasts.
What Should Never Be Commissionable
- Equipment and parts cost. You did not earn it. Pay commission on the profit, not the pass-through.
- Financing dealer fees. That fee is your cost of buying down a rate. Paying commission on it means paying for it twice.
- Sales tax and permit fees. Money you collect and hand to somebody else.
- Subcontracted work. Crane, electrician, drywall repair — someone else's labor.
- Warranty and callback work. If it comes back inside the window, the incentive comes back with it.
- Jobs below your margin floor. No bonus is earned on a job that lost money. Write the floor down before anyone asks.
The Overtime Rule That Turns a Good Pay Plan Into a Six-Figure Problem
This is the section most pay plan articles skip. It is the one that has actually cost HVAC owners money.
Commissions are not separate from the overtime calculation. They are part of it. Federal regulation 29 CFR 778.117 states that "commissions are payments for hours worked and must be included in the regular rate" — whether commission is the technician's entire pay or just a supplement, and regardless of how often it is calculated or paid.
Non-discretionary bonuses and spiffs work the same way. Under 29 CFR 778.209, a bonus "must be apportioned back over the workweeks of the period during which it may be said to have been earned," and the employee then receives additional overtime compensation for every week in that period in which he worked over 40 hours. Paying a monthly agreement spiff means going back and recomputing overtime for each week of that month.
This is a real legal exposure, not a technicality. Confirm your pay plan in writing with an employment attorney and your state labor department before you run it. Nothing on this page is legal advice.
It Is Being Enforced — in This Industry, Right Now
- April 8, 2026. The U.S. Department of Labor announced it recovered $122,476 for 140 workers from a Mississippi HVAC employer that "did not include non-discretionary bonuses when calculating overtime wages for workers." That is the exact mistake in the spiff section above.
- January 24, 2024. DOL recovered $180,172 — $90,086 in back wages plus an equal amount in liquidated damages — for 63 employees of a Colorado HVAC company that failed to pay time and one-half over 40 hours and failed to include travel time in hours worked.
- Liquidated damages can double it. The Colorado case shows the pattern: the back wages are only half the bill.
There is an overtime exemption for commissioned employees — FLSA Section 7(i) — and HVAC owners reach for it constantly. It requires all three of the following:
- The employee is employed by a retail or service establishment
- The regular rate exceeds one and one-half times the applicable minimum wage for every hour worked in any workweek containing overtime
- More than half of total earnings in a representative period consist of commissions — a period no shorter than one month and no longer than one year
Here is the part that matters: building and other contractors sat on the Department of Labor's list of establishments that lack a "retail concept" until the agency withdrew both lists in 2020. DOL now applies "the same 29 CFR Part 779 analysis to all establishments" — case by case, no categorical safe harbor either direction. An HVAC contractor cannot simply presume this exemption applies. Get a written legal opinion before you build a plan on it.
Sources: U.S. Department of Labor, Fact Sheet #20; 2020 final rule withdrawing 29 CFR 779.317 and 779.320; WHD news release, April 8, 2026; WHD news release, January 24, 2024.
Five Things to Verify This Week
- Confirm every technician's classification. Non-exempt until an attorney tells you otherwise, in writing.
- Check whether commission is in your regular rate. Open last month's payroll and do the math by hand on one technician who worked overtime.
- Audit every recurring spiff and bonus. If it is announced in advance and earned by hitting a number, it is non-discretionary. It belongs in the regular rate.
- Look at travel time. The Colorado case turned partly on it. Know your rule and apply it the same way for everyone.
- Check your state. Several states require daily overtime past eight hours and have their own rules on commissions and deductions. Federal law is the floor, not the ceiling. Call your state labor department.
The Guardrails — and How to Roll It Out Without Losing Your Team
A pay plan without guardrails is not an incentive. It is an open account.
The Guardrails
- A margin floor. No incentive is earned below a defined gross margin. Otherwise you are paying a bonus on a job that lost money.
- A callback clawback. Same failure back inside the warranty window, the incentive comes back with it. One rule, more quality impact than a training class.
- A published non-commissionable list. Equipment cost, parts cost, dealer fees, permits, sales tax, subcontractors. Written down before anyone argues about it.
- A guaranteed floor in the slow season. Performance pay without a floor turns January into a resignation letter. Decide the floor now, not in a panic.
- A cap decision made on purpose. Cap it and you tell your best technician when to stop. Leave it uncapped and you must be certain the margin math holds at volume. Either is defensible. Accidental is not.
- Draw versus guarantee, defined in writing. A recoverable draw is a debt to the company. A guarantee is not. Technicians almost never hear the difference — spell it out.
- A one-page calculation. One page, one worked example, one number every technician can reproduce on his phone.
- A change-notice period. Never adjust a plan mid-period without warning. Do it once and you pay for it in turnover for two years.
- A quarterly audit. Pull three technicians, recompute their checks by hand, and confirm the plan is producing the behavior you bought. Plans drift. So do people.
Rolling It Out Without a Mutiny
- Model it against real history first. Take last quarter's actual production and run every technician through the new plan. If your top performer loses money, you found the flaw before he did.
- Write the one-pager before the meeting. If you cannot fit the plan on one page with an example, it is too complicated to change behavior.
- Announce with real notice. Not a Friday afternoon. Not by text. Not attached to a pay stub.
- Run it in parallel for a full pay period. Show both numbers side by side on every check. Nothing builds trust in a new plan faster than letting a technician verify it against the old one.
- Guarantee nobody drops in the first period. In writing. This costs you one payroll and buys the whole room.
- Hold a meeting where they are allowed to argue. The objections you hear in that room are the objections you would otherwise hear from a competitor's recruiter.
- Publish the ladder alongside it. A pay plan answers how they get paid. A wage ladder answers how they get more. Techs need both. Build the recruiting and retention system →
A pay plan lives or dies at the service manager's desk. He is the one holding the margin floor, running the callback clawback, and explaining the check on Friday. Change the plan without training him and you have simply moved the argument. Train the manager who has to run it →
HVAC Technician Pay Plans: Frequently Asked Questions
How should I structure an HVAC technician pay plan?
Start with the behavior, not the percentage. Decide what you need technicians doing differently, then build the plan that pays for exactly that. Most established residential service companies land on a hybrid: a guaranteed hourly base that covers the technician in a slow week and keeps your overtime math clean, plus a commission or bonus paid on gross profit above a defined threshold. Whatever you choose, it has to pass one test — the technician can calculate his own check before payday. A plan nobody understands changes nobody's behavior.
Is performance pay better than hourly for HVAC technicians?
It is better at some things and worse at others. Performance pay ties earnings to produced work rather than clock time, so efficient technicians earn more without costing you more per job. It also invites corner-cutting and callbacks if quality is not measured, punishes technicians in a slow season unless you guarantee a floor, and demands an accurate flat-rate book you can defend. Straight hourly is simpler, more predictable, and carries the least legal risk — but it rewards presence rather than production. Neither is universally right. Match the plan to the maturity of your job costing.
What percentage should I pay an HVAC technician on commission?
There is no credible published benchmark, and almost everyone quoting one is selling software or coaching. Build yours from your own numbers instead. Take the gross profit a job actually produces, decide what share of that gross profit the business can sustainably give away and still fund overhead and net profit, then work backward to a percentage. A number copied from a blog post is a number built on someone else's overhead. What is verifiable: ACCA reported in June 2026 that 47% of HVACR contractors incentivize their technicians, and that those incentives produced a 5% average ticket increase.
Do I still owe overtime to a technician paid on commission or spiffs?
Almost certainly yes, and this is where owners get hurt. Under 29 CFR 778.117, commissions are payments for hours worked and must be included in the regular rate used to compute overtime. Non-discretionary bonuses and spiffs work the same way, and 29 CFR 778.209 requires you to apportion the bonus back over the weeks in which it was earned and pay additional overtime for every one of those weeks that ran past 40 hours. This is not theoretical. On April 8, 2026, the U.S. Department of Labor announced it recovered $122,476 for 140 workers from a Mississippi HVAC employer that did not include non-discretionary bonuses when calculating overtime wages. Confirm your plan with an employment attorney and your state labor department before you run it.
Does the FLSA commissioned-employee exemption cover HVAC technicians?
Do not assume it does. The Section 7(i) exemption requires all three of the following: the employee must be employed by a retail or service establishment, the employee's regular rate of pay must exceed one and one-half times the applicable minimum wage for every hour worked in a workweek in which overtime hours are worked, and more than half the employee's total earnings in a representative period must consist of commissions. Building and other contractors sat on the Department of Labor's list of establishments that lack a retail concept until the agency withdrew both lists in 2020. Establishments are now evaluated case by case under the same 29 CFR Part 779 analysis, which means an HVAC contractor cannot simply presume the exemption applies. Get a written legal opinion before you rely on it.
How much does an HVAC technician actually cost per hour?
Far more than the wage. BLS Employer Costs for Employee Compensation data for December 2025 shows that in construction, employer compensation costs averaged $50.93 per hour worked — $35.47 in wages and salaries and $15.45 in benefits, meaning benefits were 30.3% of total compensation. For installation, maintenance, and repair occupations the benefit share was 31.3%. Apply that ratio and a $30 hourly wage is roughly $43 an hour in total compensation, before you add commission, the overtime premium those payments create, the truck, the phone, or a single unbillable minute.
How do I change a pay plan without losing my technicians?
Never spring it. Announce the change with real notice, run the new plan in parallel with the old one for at least one full pay period so every technician can see both numbers side by side, and commit in writing that nobody's earnings drop in that first period. Hand out a one-page calculation with a worked example on it. Then hold a meeting where people are allowed to argue with it. Owners who skip the parallel run save two weeks of work and pay for it in turnover for two years.