HVAC Technician Pay Plans: Hourly, Commission, Flat-Rate and Overtime Rules

This is general information, not legal or tax advice. Pay rules vary by state; check with a payroll provider or employment attorney before changing a pay plan.

Common HVAC pay plans

Straight hourly. Simple and predictable. Doesn't reward productivity, so many shops add incentives.

Hourly plus commission or spiffs. A base hourly rate plus a percentage of sales (often on equipment replacements, maintenance agreements or add-ons) or flat spiffs per item sold. The most common hybrid.

Flat-rate (piece-rate) pay. Techs earn a set amount per task or per "flag hour" in your flat-rate price book, regardless of the actual time. Rewards speed and accuracy; needs careful payroll.

Commission-only. Mostly for comfort advisors (replacement sales), not service techs. Even then, overtime and minimum-wage rules may still apply.

The overtime rule that trips owners up: the "regular rate"

Under the FLSA, non-exempt employees get 1.5× their regular rate for hours over 40 in a workweek. The regular rate is all pay for the week divided by all hours worked, and it includes:

• Commissions
• Spiffs and sales incentives employees know about in advance
• Production, quality or callback bonuses
• Flat-rate/piece-rate earnings

Truly discretionary bonuses (not promised, not tied to a formula) can be excluded, as can a few other items such as certain gifts and paid time off.

Most common mistake: paying overtime only on the base hourly rate while also paying spiffs or commissions. That underpays overtime. Many payroll systems won't fold spiffs into overtime unless you set them up to.

Worked example: hourly plus spiffs

A tech earns $25/hour, works 45 hours, and earns $225 in spiffs that week.

1. Straight-time pay: 45 × $25 = $1,125
2. Plus spiffs: $1,125 + $225 = $1,350 total
3. Regular rate: $1,350 ÷ 45 = $30.00/hour
4. Overtime premium: 5 OT hours × ($30 × 0.5) = $75
5. Total pay: $1,350 + $75 = $1,425

Paying OT on the $25 base alone would give $62.50 in premium instead of $75.

Worked example: flat-rate tech

A flat-rate tech earns $1,200 in flag pay and actually works 50 clock hours.

1. Regular rate: $1,200 ÷ 50 = $24/hour
2. Overtime premium: 10 OT hours × ($24 × 0.5) = $120
3. Total: $1,320

Two must-dos for flat-rate plans:

• Track actual clock hours, not just flag hours. Overtime is owed on hours worked.
• Check minimum wage every week. Total pay ÷ hours worked must meet the federal minimum and any higher state or local minimum. Slow weeks are where violations happen.

Other pay items to get right

• Drive time and shop time: time spent at the shop loading, driving between calls and in required meetings is generally work time.
• On-call: whether on-call time counts depends on how restricted the tech is. Calls they actually run are work time.
• Tool allowances and deductions: deductions for tools or uniforms can't drop pay below minimum wage.
• State rules: some states require daily overtime (over 8 hours) or have their own commission and wage-statement rules.

Designing a plan techs like

• Keep it simple enough that a tech can calculate their own check.
• Pay for quality too (low callback rates), not just sales.
• Show techs their numbers weekly in your field service software.

FAQ

Are HVAC technicians exempt from overtime?

Almost never. Service techs don't meet the salary-plus-duties tests for the common exemptions, so plan on overtime for hours over 40.

Do spiffs count toward overtime?

Yes, spiffs and commissions that are part of a known incentive program count in the regular rate.

Can I pay techs a salary and skip overtime?

Paying a salary doesn't by itself make someone exempt. A salaried non-exempt tech is still owed overtime.

Sources

• U.S. DOL Fact Sheet #23: Overtime pay requirements of the FLSA
• 29 CFR 778.111: Pieceworker regular rate
• U.S. DOL Fact Sheet #56C: Bonuses under the FLSA
• Modern Tire Dealer: Wage and hour laws and spiffs