A new year is just around the corner, and with it comes the opportunity to make goals and set objectives for the coming year. This also means changes and adjustments to processes and procedures that will lead to the desired results.
The landscape of automotive retailing is changing rapidly. From the sales process to profit margin to the influx of Millennials into the workforce, many things are changing about the way we do business.
With all of this change, comes the need to evaluate the way we pay our employees. Here are some points to consider as you head toward 2019.
Sales – Providing Stability for Salespeople
For many years, the gross-commission pay structure was king. Margins were strong and customers looked to dealerships as the experts on the vehicles being sold. For better or worse, however, times have changed. With the rise of the information age, customers come into the dealership often knowing more about their intended purchase than the dealer, and they come armed with the ability to negotiate paper-thin margins.
What this all means for pay structure is that your average salesperson will struggle to make ends meet working off of straight commission. Studies indicate that salespeople expect to make a base of $3000 per month and will struggle to survive on less.
One solution is the Base-Plus-Bonus Pay Plan. Instead of paying straight commission, or paying “mini” flat-rate commissions, this plan provides for a base salary (of $3000, for example) with the opportunity to earn commissions or bonuses based on performance.
While the top salespeople will still thrive on straight commission, a base-plus pay structure can create a nice safety-net for the average salesperson, and could lead to better overall performance of your entire staff.
Service Techs – Flat Rate vs Hourly
There is a lot of opportunity to cut out fat and increase profits through efficient management of service expenses. There is not one right answer that suits every department, mitigating large salary expenses in your service department is an easy place to start.
While some shops prefer the predictability of hourly pay, this structure inherently fails to promote productivity, if not administered carefully. Conversely, with a flat rate structure, technician pay can go through the roof at times when things get really busy.
That’s not necessarily a bad thing, because it should mean that the revenue is coming in proportion to the outgoing pay. However, there is a fine balance between rewarding high productivity, and controlling the overall expenses of the department.
Any changes made to pay structure should be considered from both a budget standpoint and from the perspective of the employees’ productivity and well-being. Other factors, such as warranty work should be considered as well. Often the hours paid by the manufacturer to cover a warranty repair are meager at best. While the dealership might come out ahead by paying flat-rate for warranty work, the technician might be better off on an hourly pay plan.
The world is changing. Millennials are fast overtaking Baby Boomers and Gen Xers in the workforce. They are harder to recruit and retain than any previous generation. This is particularly true in the car business. 2019 is the perfect time to take a long, hard look at how compensation will affect your business moving forward.