When a good tech asks for a raise and you're not sure whether hourly, commission or spiffs would serve them better, the pay plan you pick shapes who stays. For most residential HVAC shops, the safest place to start is a solid hourly wage with a few clear, written bonuses on top, and commission only works well when you've checked the federal overtime rules that come with it. Whatever you choose, spiffs and production bonuses count toward overtime pay under federal law, so the plan has to be built with that in mind from the start.
Pay is one of the few levers an owner can pull this week that every tech feels on their next check, and it's also one of the easiest to get wrong. A plan that rewards the wrong thing can push techs to oversell, and a plan that ignores the overtime rules can turn into a wage claim years later. So let's walk through what techs are earning, how each plan works from your side of the desk and the rules that trip shops up.
What do HVAC techs earn right now?
The Bureau of Labor Statistics puts the median pay for HVAC and refrigeration mechanics and installers at $61,010 a year, or $29.33 an hour, as of May 2025. It also projects 11% job growth from 2025 to 2035, with about 40,600 openings a year, which tells you the competition for good techs isn't going away.
Experience moves the number a lot. ACHR News reported Payscale's 2025 figures, which run from $54,100 ($26.01 an hour) for entry-level techs to $77,200 ($37.12 an hour) at four to seven years and $90,800 ($43.65 an hour) for supervisors. Pay also varies by region, so check what shops near you are posting before you settle on a base rate, here in Oregon or anywhere else.
Should I pay hourly, commission or a mix?
Many shops end up with a mix, because each plan rewards something different and none of them covers everything on its own. Here's how they compare from the owner's side.
Hourly pay
Hourly pay is simple to explain and simple to run, and it rewards showing up and doing the work carefully. Its weakness is that it doesn't reward speed or sales, so your best tech and your slowest tech can earn the same for very different days. It also makes overtime easy to figure, since the rate is right there on the time card.
Commission
Commission ties pay to what the tech sells or produces, which can lift your best people's earnings well past an hourly ceiling. The risks are real, though. A commission plan can push techs toward selling over fixing, it makes pay swing with the seasons, and it brings in federal overtime rules that many owners don't know about, which the next section covers.
Spiffs and bonuses
Spiffs are small, specific payments for a result you want, such as a maintenance agreement sold, a five-star review or a lead the tech sets for the sales team. ACHR News looked at how contractors use incentives and found shops paying spiffs for reviews, yard signs, membership sales and leads, with the approach summed up in the piece as "we reward the results we want to see." The same article warns that offering too many incentives at once dilutes their impact, so pick two or three and keep them steady.
Does a commission tech still get overtime?
Usually yes, unless your company and the tech's pay meet all three tests of a narrow federal exemption. The Department of Labor's Fact Sheet #20 explains that under Section 7(i) of the Fair Labor Standards Act, a commissioned employee is exempt from overtime only if they work for a retail or service establishment, their regular rate is more than one and a half times the minimum wage for every hour in an overtime week, and more than half their earnings in a representative period come from commissions. If any one of those isn't met, you owe time and a half for hours over 40.
The first test is the one HVAC owners should take slowly. A retail or service establishment is one where at least 75% of sales aren't for resale and are recognized as retail in that industry. For years, the Department kept a list of businesses it said lacked a "retail concept," and air-conditioning contractors were carved out on it. In 2020, the Department withdrew that list and said it would apply the same analysis to every establishment, so whether an HVAC company qualifies now depends on the same questions everyone faces, such as whether it serves the public's everyday needs and sells at the end of the distribution chain.
That's a real judgment call with real money behind it, so talk to an employment attorney or your payroll provider before you put a tech on straight commission without overtime. State rules can add their own requirements on top of the federal ones, too.
Do spiffs and bonuses change what I owe in overtime?
Yes. The Department of Labor's Fact Sheet #56C on bonuses says "Nondiscretionary bonuses are included in the regular rate of pay," and it lists production bonuses, attendance bonuses, quality bonuses and safety bonuses as examples. A spiff promised in advance for a review or an agreement sold works the same way, because the tech knows ahead of time what earns it.
The fact sheet walks through the math in three steps, and it's worth doing once by hand so you see how it works:
Add up everything the tech earned for the week, including the bonus, and divide it by the hours worked. That's the regular rate.
Multiply the regular rate by half to get the extra premium for each overtime hour.
Multiply that premium by the overtime hours, and pay it on top of the straight time.
The fact sheet's own example uses a $10 hourly worker who earns a $50 bonus in a 43-hour week, which raises the regular rate to $11.16 and the overtime due to $16.74. If you run payroll through software or a provider, ask how it handles a bonus entered in the same pay period as the hours, and make sure every spiff gets recorded in the week it was earned so it lands in the right overtime math.
How do I switch pay plans without losing good techs?
Change pay slowly, in writing and with the numbers in front of everyone. Before you announce anything, run the new plan against each tech's last three to six months of actual work, so you know who would earn more, who would earn less and by how much.
A few habits make the change go smoother:
Explain why you're changing it in plain words, and show each tech what last season would have paid under the new plan.
Offer a guarantee for the first few months, such as never earning less than the old hourly rate, while everyone learns the new plan.
Put the whole plan on one page, including how spiffs are earned and when they're paid.
Pick a start date at the beginning of a pay period, ideally in a slower month.
Check back after 60 days and fix anything that's rewarding the wrong thing.
If you're losing techs before you ever get to pay, our page on HR and onboarding systems covers the parts of keeping a crew that happen in the first few weeks.
What has to be tracked for any pay plan to be fair?
Any plan beyond straight hourly needs clean records of hours, sales and spiffs, tied to each tech and each pay period. That means accurate time cards, a record of every agreement and job a commission is based on, and a running list of spiffs with the date they were earned.
The manual way is a simple weekly sheet the office fills in from time cards and invoices, with one row per tech. The tool way is to use the timesheet and payroll features in the software you already run and confirm with your payroll provider that bonuses are flowing into the overtime calculation. Either way, someone other than the tech should check the numbers before payroll runs, because a pay plan only builds trust if the math is right every time. Our page for HVAC contractors covers the other back-office systems that tend to need attention in a growing HVAC shop.
Questions owners ask
Is commission legal for residential HVAC service techs?
Commission itself is legal, and the question is whether you still owe overtime. Unless your company counts as a retail or service establishment and the tech meets the other two Section 7(i) tests, a commissioned tech is owed time and a half for hours over 40, so check with an employment attorney before relying on the exemption.
How much should a spiff be?
A spiff should be big enough that a tech notices it and small enough that it doesn't tempt anyone to push a customer. Whatever amount you pick, write it down, pay it consistently and remember that it counts toward the regular rate when you figure overtime.
Should install crews and service techs be paid the same way?
Not necessarily, because the work is different. Service techs often fit a plan with spiffs for agreements and reviews, while install crews are usually better served by hourly pay with a bonus tied to quality, such as no callbacks within 30 days.
How do I explain a new pay plan to the crew?
Show each tech what the last few months would have paid under the new plan, put the whole thing on one page and answer questions one on one. A short guarantee during the switch helps people trust that the change isn't a pay cut in disguise.
So think back to that tech asking for a raise. With a clear base rate, two or three spiffs they understand and overtime figured the right way, you can give them an answer that rewards the work you want and holds up when payroll runs.
If you'd like to see where pay, hiring and everything else in the company still runs through you, the free Foundation Inspection follows a job from the moment a lead comes in to the moment the money's in your bank and asks who owns each step along the way. It takes about an hour with no paperwork in front of you, and it shows you which handoffs would free up the most of your week.
I'm Tim Volner, and I run Sentric Group in Salem, Oregon, where I work with contractors who've built a solid company but have reached the point where it can't seem to run for a single day without them.