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Auto Dealers’ Pay Plans Slowly Changing

Auto Dealers’ Pay Plans Slowly Changing

The lack of a guaranteed base salary at some dealerships is a deal breaker to some prospective Gen Y employees.

According to the National Automobile Dealers Assn.’s 2016 Workforce study, virtually all U.S. dealerships offered standard employee benefits across these three specific perks:

Health Insurance. For the last three years, 99% of surveyed dealerships offered employee health-insurance plans. Of these, 96% offered employee plus family plans. Ninety two percent of dealerships surveyed also offered employee family dental plans in 2015.

Paid Time Off. Vacation and sick time are standard benefits all full-time retail automotive employees now can expect: 100% of U.S. dealerships offered those to employees last year, up from 96% in 2013.

Retirement Planning. Ninety seven percent of dealerships offered 401(k) retirement plans to full-time employees. To incentivize employees to participate, a majority of dealerships matched 1% or 2% of total employee compensation. Nearly half of the dealerships who matched contributions also had no cap on the total annual contribution.

Although these are the only standard three perks across the industry, there are factors currently at play that will significantly shape the landscape in the immediate future. 

The Rise of Millennials. They are bringing about a major change in the automotive industry and its standard for benefits. Historically, they have been a group that has avoided working in dealerships for multiple reasons.

Most importantly, the industry did not offer them the benefits they wanted. Dealerships have not met Millennial expectations when it comes to flexible schedules, bonus packages and even a dynamic work environment.

Moreover, the lack of a guaranteed base salary at some dealerships does nothing in helping Gen Y pay for increasing housing costs, record-high college loan debts and other major expenses previous generations have not experienced.

Attracting and Retaining Millennials. With Gen Y now making up 60% of dealership hires, and with the turnover rate for salespeople at a whopping 67%, dealerships should focus on attracting and maintaining Millennials by offering them a meaningful career path, manageable work-life balance and proper compensation.

To better cater to this growing Millennial workforce, dealers are slowly abandoning the all-or-nothing approach to high risk/high reward commission plans.

For the most part, the majority of dealership employees are paid strictly based on performance. But the times are changing. With the rise of cross training and new positions such as product specialists, we’re seeing a shift in pay scales.

Dealer principals are rethinking compensation away from rigid commission-based models to a base-plus-commission approach that is far more attractive.

Today, a handful of dealers are using this strategy to boost the base pay for entry-level jobs while setting the unit expectation higher for all employees. Those that have are seeing great success.

Traditional pay plans offering a $1,500 base plus bonus are not compelling or even practical to Millennials who are seeking consistent pay.

Shifting to a more consistent pay program will provide new hires with added financial security and peace of mind. Instead of stressing about performance, they can focus on selling to customers without being overly aggressive. This should improve customer interactions and drive traffic as today’s customers seek out businesses that provide them with a no-pressure experience and exceptional support.

This new approach to compensation not only will attract young talent from industries outside of retail automotive, it will help the bottom line by decreasing commissions amount while setting the bar higher for the entire sales team to work more efficiently.

The benefits landscape is beginning to change, and it falls on the dealer to properly manage it.

A recent DrivingSales human resources study reported less than 10% of surveyed dealerships use a system to manage their benefits and payroll. What’s more telling is that most dealers use homegrown systems to manage these HR components.

It’s time to re-evaluate if a dealership using such a system sees inconsistencies in benefits management or major issues with employee turnover or poor hires.

Dealerships currently using an out-of-date system or no system at all should consider investing in a process-based hiring system that uses technology to handle everything from the sourcing of applicants to the administration of benefits such as payroll and healthcare.

With a more automated hiring system, dealerships can make sure they’re strategically reviewing all applications and completing every step of the hiring process. That leads to better hiring decisions and better employees. Robinson is CEO and co-founder of Hireology. He can be reached at [email protected] or 312-253-7870

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