Although more auto retailers are adopting salary-based compensation strategies to attract and retain employees seeking stable incomes, sales commissions are still key to dealerships, and that could be particularly true in an uncertain economy.
Canadian dealerships remain committed to commission
Performance-based compensation is deeply woven into many dealership job titles, even technician
The study was conducted in the fall of 2022 by Research+Knowledge=Insight, an independent research company based in Toronto. It calculated the responses of 655 dealership employees on the audience lists of Automotive News Canada and survey sponsor Auto Careers Group. The margin of error is plus or minus 3.5 percentage points, 19 times out of 20.
The 2023 Automotive News Canada Retail Salary Survey, which polled 655 dealership staff in various roles, found commissions comprise more than half of some employees’ compensation. New-car managers reported the highest percentage at 54.7 per cent of earnings.
Sales advisers, with average annual salaries of $91,300, reported that nearly half — 48.2 per cent — of their earnings came from commissions.
Commissions appear throughout the job titles of those surveyed. Technicians, for example, reported an average of 4.7 per cent of their salaries earned from commission.
Employer reliance on commissions appears to be here to stay. Indeed, uncertainty surrounding interest rates, vehicle inventory issues and employment, might mean that commissions increase in importance, said Travis O’Rourke, president of the Toronto-based recruitment firm Hays Canada.
“It’s probably going to become more prevalent. As you go through economic times, it’s far less risk to an employer. If I can say a $30,000 base salary with a higher commission ... if you make the sales, great. If you don’t, worse case, I’m out $30,000.
“When you move to a $70,000 base salary with low commission, my risk [as a an employer] is obviously significantly greater, and your upside as an employee is significantly lower.”
‘DRIVEN BY THE NUMBERS’
O’Rourke said his data suggests that sales staff are willing to take cuts in base pay if they can then make more money with commission. He expects that over the next 12 months, more pay plans with lower base salaries and higher commissions will become common.
Jordan Rees, CEO of Auto Careers Group, said that the only way he sees commissions disappearing from the market is a shift to a direct-to-consumer sales model.
“I think that the performers really like [commission], absolutely, because then it’s that eat-what-you-kill mentality,” Rees said. “They’re driven by the numbers.”
That optimism for the future of commissions isn’t shared by everyone, however. Helena Byrne, director of human resources at Calgary-based McManes Automotive Group, said many new hires, particularly employees in their first jobs, seek stability in their compensation packages.
“The industry is struggling right now, and people want that guarantee more than ever,” said Byrne, who oversees HR at the group’s 14 stores in Alberta and British Columbia.
“We’re finding those established salespeople really just want that commission; they already know their capability.” Some McManes dealerships are experimenting with pay plans that reward employees based on the overall success of the dealership rather than their individual results, Byrne said.
“That bonus plan extends all the way down to lot attendants, everyone who’s part of that team atmosphere,” she said.
Dealers are struggling to recruit new employees, Byrne said, so making a pay plan clear to potential candidates is critical.
“What with our whole world right now — with inventory issues, really — candidates have the upper hand right now,” she said. “And they’re being very picky — as they should be.”
With files from David Kennedy