Gross compensation at Canadian dealerships grew faster than inflation in 2022

Pay raises for workers in Canada’s automotive retail sector outpaced historically high inflation over the last three years, but the looming impact of a recession and the prospect of rising vehicle inventories could pour cold water on optimism for further increases. Even some staff — especially those who have been raking in higher commissions — doubt the pace can continue.

According to the 2023 Automotive News Canada Retail Salary Survey that polled 655 dealership employees and managers last fall, average pay across all dealership job titles was $131,200 in 2022. The figure, which includes bonuses and commissions, was up from $124,700 for 2021 and $115,700 in 2020.

On average, dealership staff grossed about 13.5 per cent more in 2022 than they did in 2020, beating out inflation of about 12 per cent over the three-year period, according to the Bank of Canada’s Consumer Price Index.

        • Explore our four-part series about wages in Canadian auto retail.

But it was healthier commissions tied to the vehicle inventory shortage, not salary increases, that were responsible for much of the increase, said Jordan Rees, CEO of the automotive recruitment company Auto Careers Group Inc.

“There has been less competition out there because there’s a lack of inventory,” he said.

Particularly for commission-reliant sales staff, Rees said, the low supply of vehicles has meant little wiggle room for consumers on negotiating prices, driving up commissions on each sale.

“If you were getting 25 per cent as a salesperson, and you were averaging $1,000 or $1,200 [per vehicle], and now suddenly you’re holding at MSRP and getting $2,000 or $2,500, your bonus is higher,” he said.

SUPPLEMENTS TO SALARY

The survey results bear this out. Most dealership staff in positions that rely heavily on nonsalary pay typically saw their compensation rise quicker over the past three years than those that do not.

Product advisers, for instance, who reported that close to half of their total average compensation was tied to commissions, saw their pay rise to $91,300 in 2022 from $77,900 in 2020, or about 17 per cent. Technicians, on the other hand, reported a nearly six-per-cent increase in compensation, with average pay climbing to $75,700 in 2022 from $71,600 in 2020. Responding technicians said that only about five per cent of their total pay hinged on commissions or bonuses over the three years.

The increased number of employees leaving their employers to secure higher pay also likely played a role in the higher compensation that dealership employees received after the initial year of the pandemic.

The labour market favoured job seekers in 2021 and 2022, said Tory McNally, director of human resources services at the Winnipeg-based HR consultancy Legacy Bowes. Many workers have turned that to their advantage by jumping to new employers, she said.

“Employees have really figured out that the best way to get a big, juicy raise is to quit and go to a different employer,” McNally said. “So you’re seeing lots of people switch jobs quite frequently.”

Given the historically high rate of inflation over the past couple of years, only workers who have “chased it” have kept up in their compensation, said Travis O’Rourke, president of the recruitment agency Hays Canada.

“A lot of people who kind of sat on the sidelines and hoped their company would give them an increase at a good pace, that’s not an appropriate way to get your money,” O’Rourke said.

EXPECT MORE? MAYBE NOT

But not all workers who have remained with their employers are staying idle, McNally said, with many agitating for raises far more often than in the past.

In turn, employers have needed to work harder and be more willing to hand out raises if they hope to retain employees, she said.

Despite the strong pay gains, 62 per cent of dealership employees surveyed said they expect compensation to continue climbing over the next three years. Neither McNally nor O’Rourke was surprised by this optimism but warned that wage gains might be harder to come by across the Canadian labour market in 2023 and beyond.

With a recession forecast this year, McNally said, companies might be unable to keep up with some of the pay raises and improved benefits they have been offering, which could put staff in a tighter spot.

“What the employees will do, whether they stick to it or if they kind of find closed doors everywhere, maybe they’ll settle down a little bit, and it’ll even out to be a little less of an employees’ market,” she said.

At dealerships, greater vehicle availability could also disrupt the higher commissions that staff have been earning, Rees said.

“I’m hoping not, but in 2023 [and] 2024, we might see that race to the bottom start happening again as” vehicle shortages ease, he said.

Staff in positions that rely heavily on commissions — who saw the largest runups in compensation over the past couple of years — are also warier about their prospects over the next three years.

Nearly a quarter of product advisers expect their pay to decrease over the next three years, while 48 per cent anticipate grossing more. By contrast, just 10 per cent of technicians expect a decrease in compensation, while 56 per cent expect a raise.

Many staff in other commission-dependent roles are even more skeptical on whether they will be earning more over the next three years. Thirty-two per cent of used-vehicle managers expect their pay to decrease, compared with half who said it would increase. In finance and insurance, 30 per cent of respondents forecast a decrease, compared with 55 per cent who expect to be earning more in three years’ time.