What your labor rate has to pay for
Every hour of labor you sell has to pay for four things:
- The technician who did the work, with payroll taxes, workers' comp and benefits.
- The hours you pay that technician for but can't sell: time off, waiting on parts and approvals, cleanup, training and comebacks.
- A share of everything else the shop costs: rent, the office, equipment, insurance, software.
- Your profit.
Parts, paint and materials, and sublet work earn gross profit too, and pay part of the overheads. The rest falls on labor. The four steps below work it out for an example shop with 4 body technicians; put your own figures in at each step.
Step 1: What a technician really costs
Start with what one technician costs you in a year. Our example pays $26.89 an hour, the May 2025 median for body repairers in body, paint and glass shops. For body repairers overall, the middle half earned $21.99 to $33.27 an hour.
| Cost | A year |
|---|---|
| Wages: $26.89 × 2,080 hours | $55,931.20 |
| Social Security and Medicare (7.65%) | $4,278.74 |
| Federal unemployment tax (FUTA) | $42.00 |
| State unemployment tax (2.7% of the first $9,000) | $243.00 |
| Workers' comp ($2 per $100 of payroll) | $1,118.62 |
| Health insurance ($500 a month) | $6,000.00 |
| Total | $67,613.56 |
On-costs add 21% to the wage here: $32.51 for every hour paid. The workers' comp rate and the health insurance are made up for the example.
Workers' comp for auto body work is usually rated under class 8393, and the price varies widely by state and insurer. In Oregon in 2026, for example, the state fund charged $0.98 to $1.82 per $100 of payroll before assessments. Get a quote for your own shop, and add anything else you pay: retirement contributions, bonuses, uniforms, tool allowances.
Step 2: The hours you can sell
You pay for 2,080 hours a year, but a technician can't sell all of them. Take off the days they're paid but not at work, then the hours at work that don't go on a paying repair order:
| Hours | |
|---|---|
| Hours paid: 40 a week for 52 weeks | 2,080 |
| Less 10 vacation days, 6 paid holidays and 5 sick days | -168 |
| Hours at work | 1,912 |
| Less the 25% not on paying jobs: waiting, cleanup, training, comebacks | -478 |
| Hours sold | 1,434 |
The time off and the 75% are made up for the example. Use your own: the hours on your repair orders against the hours you paid.
The wage
$26.89 an hour
What the technician earns.
Cost per hour paid
$32.51
With payroll taxes, workers' comp and health insurance.
Cost per hour sold
$47.15
75% more than the wage, once the unsold hours are counted.
That last figure is what each hour of labor on an estimate costs you before a cent of rent is paid. Paying flat rate changes the sums; the section on flat rate below explains how.
Step 3: Spread your overheads
Now add up everything else the shop costs in a month. Our example's overheads, all made up:
| Overhead | A month |
|---|---|
| Rent: 5,000 sq ft at $1.20 a square foot | $6,000 |
| Electricity, gas, water and trash | $1,500 |
| An estimator who also runs the office, with payroll taxes | $6,500 |
| A manager's salary, or your own if you run the shop | $6,000 |
| Insurance: garage liability, garagekeepers and property | $1,200 |
| Equipment finance and servicing: booth, frame machine, welders, lifts | $2,500 |
| Estimating system, software, phones and internet | $900 |
| Accountant, bank and card fees | $600 |
| Training and certifications | $300 |
| Shop supplies you don't charge to jobs, waste disposal and protective gear | $1,000 |
| Total | $26,500 |
That's $318,000 a year. Spread over the 5,736 hours the 4 technicians sell, it's $55.44 an hour.
Labor doesn't carry all of it. The gross profit on parts, paint and materials, and sublet pays a share; in this example, 40%. That leaves labor $33.26 an hour. To find your own share, take last year's gross profit on parts, paint and sublet and divide it by your overheads.
Technician cost
$47.15
Per hour sold, from step 2.
Labor's share of overheads
$33.26
Per hour sold, after parts and paint pay their share.
Break-even rate
$80.41
Every hour sold below this loses money.
Step 4: Add your profit
To make a 15% profit on every hour you sell, divide the break-even rate by 0.85: $80.41 ÷ 0.85 = $94.60 an hour.
If labor had to carry every dollar of overhead, with no help from parts and paint, the same shop would need $120.69 an hour. That's why the margins on parts and paint matter so much to a shop's labor rate: our guide to body shop profit margins covers them.
What moves your rate
The same shop, changing one thing at a time:
| Change | Break-even | With 15% profit |
|---|---|---|
| Quieter: 65% of hours at work sold | $92.78 | $109.15 |
| The example: 75% of hours at work sold | $80.41 | $94.60 |
| Busier: 85% of hours at work sold | $70.96 | $83.48 |
| Technicians paid $33.27 an hour (the 75th percentile) | $90.56 | $106.54 |
| A fifth technician, with the same overheads | $73.76 | $86.78 |
Selling more of the hours you already pay for moves the rate most, because the technician's cost and the overheads are spread over more hours. That's the case for ordering parts early, getting approvals quickly and keeping cars moving, and for tracking the hours on every repair order: our job costing guide shows how.
Posted rates and what insurers pay
There's no official national labor rate, and what shops post and what insurers pay are often far apart. The best current figures:
| Labor | Posted, national | Massachusetts shops | Massachusetts insurers |
|---|---|---|---|
| Body | $85.56 | $65 | $49 |
| Refinish | $84.65 | $65 | $49 |
| Frame | $116.78 | $80 | $50 |
| Structural | — | $80 | $46 |
| Mechanical | $161.63 | $105 | $55 |
| Aluminum | — | $90 | — |
Posted: National AutoBody Research's index for September 2026, self-reported by shops. Massachusetts: the labor rate board's December 2025 report, with the median that shops charge on non-insurance work and the insurers' weighted average.
- Posted rates are rising: the national body rate was up 6.7% on a year earlier in September 2026, and 60% of shops raised theirs in the year.
- Rates on insurance estimates are rising more slowly. In CCC's data, they rose 2.9% in 2025 and 1.5% year over year by mid-2026.
- Some insurers cut rates: in a fall 2025 survey of more than 300 shops, about one in four said at least one insurer was paying less than it had in January.
- In Rhode Island, 14 insurers reported paying $49 to $78 an hour for body labor in 2025, a weighted average of $54.
Whether you can bill the customer the difference between your rate and the insurer's depends on your state and your contracts. In Massachusetts, a shop in an insurer's preferred program can't; a shop outside it can. If you're on a direct repair program, the agreement sets your rates; our DRP agreements guide covers the pricing clauses.
State laws on labor rate surveys
A few states regulate how insurers set the rates they pay:
| State | The rule |
|---|---|
| Rhode Island | Insurers with at least 1% of the market must survey every licensed full-collision shop each year, sending the questionnaire before June 1 and reporting by September 1. The state publishes the prevailing rates |
| Massachusetts | Since July 1, 2026, a five-member board surveys contracted and posted rates at least every four years, the first by January 1, 2027. If the commissioner finds too little competition, a hearing sets a minimum rate |
| California | An insurer that surveys rates to set a prevailing rate must report the results to the Department of Insurance. Its standard survey, which insurers may choose to use, counts eight labor types separately and leaves out discounted DRP rates |
| Washington | From October 18, 2026, insurers must tell a claimant on request when and where their labor rate data was collected and which businesses supplied it, and explain how labor and material costs were set |
| New York | No survey rule. Insurers must negotiate in good faith and, if the two sides can't agree, name a shop within 10 or 25 miles that will do the repair for the insurer's estimate |
| Connecticut | Licensed repairers must post their labor rates |
Check your own state's rules; most states have none of these.
Paying technicians flat rate
Most body shops pay technicians on an incentive basis, according to the Bureau of Labor Statistics, usually a guaranteed base plus a set amount for each task: flat rate, paid on the hours flagged on the repair order. It changes step 2. Your cost per hour sold becomes the flag rate plus payroll taxes and benefits, whatever the job really took, and the technician carries the overrun on a slow job and keeps the gain on a fast one.
Raising your rate
- Work your rate out again at least once a year, and whenever your costs change: a pay rise, a new hire, a rent review.
- Price new equipment in. A $75,000 calibration setup paid off over 5 years adds $2.62 to every hour our example shop sells.
- Set a separate rate for each type of labor you do: body, refinish, frame, structural, mechanical, aluminum.
- Post your rates in the shop and print them on every estimate, so customers know before the work starts.
- Send your new posted rates to the insurers you work with, and answer their labor rate surveys: the surveys are how most of them set what they pay.
