Are Commission Sales A Thing of The Past: Could Hourly Wage take its place for Salespeople

the reason I ask this is. A lot of the people that apply to our ads are people that get paid by the hour.

When we tell them most of their income is based on commission sales that will strike fear into them.

They think no sale no money. Now what I propose is a pay plan based on a hourly wage that is based on the number of units sold. EXample: 1-5 units =$7.50 per hour / unit 8= 10.00 per hour /

10 units=15.00 per hour/ 15 units = 20.00 per hour / 20 units= 25.00 per hour this is all retro back to the first hour. Again, john sells 10 units at 15.00 per hour his pay is 45 hour 675 x 4 wkeeks

=$2700.00 for the month based on sales of 10 units. Put together what you think of how it could work and let me know. Thank you

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Replies to This Discussion

Permalink Reply by Mark Proctor on January 26, 2011 at 9:45pm

A "safety net" will allow you to attract a higher quality person considering a career change. An hourly rate attracts clerks. 25 years ago I offered a minimum $2,000 Guarantees... $10,000 signing bonuses (with caveats) etc. We have an opportunity today, unlike anything we have seen before, to recruit, train and motivate a higher caliber of applicant. Don't attract clerks.

Permalink Reply by Douglas R Manley on January 27, 2011 at 9:12am

HOURLY WAGE OR COMMISSION - Let’s look at some actual real world numbers.

Dealership Profile: The store has 20 new and used salespersons. December numbers are shown below.

Units			Gross
Sold	Department	Gross	Per Unit
135	New Car Gross	245,619	1,819
135	New F & I	86,627	641

135	Total New	332,246	2,461

41	Used Car Gross	80,983	1,975
41	Used F & I	39,478	963

41	Total Used	120,461	2,938

176	Grand Total	452,707	2,572

A COMPARISON COMMISSION VS HOURLY WAGE

Sales	Units	Comm.	Hourly
Person	Sold	Paid	Wage	Difference

1	24	14,624	3,870	10,754
2	7	8,471	3,870	4,601
3	25	7,928	3,870	4,058
4	10	7,002	3,870	3,132
5	8	6,601	3,870	2,731
6	9	6,318	3,870	2,448
7	11	6,033	3,870	2,163
8	10	5,280	3,870	1,410
9	9	4,945	3,870	1,075
10	7	4,588	3,870	718
11	8	4,388	3,870	518
12	7	3,158	3,870	(712)
13	7	3,094	3,870	(776)
14	6	2,973	3,870	(897)
15	6	2,947	3,870	(923)
16	5	2,756	3,870	(1,114)
17	5	1,926	3,870	(1,944)
18	4	1,873	3,870	(1,997)
19	6	1,756	3,870	(2,114)
20	2	876	3,870	(2,994)

Negative	Amount			(13,471)

The hourly wage column is calculated at $15.00 per hour for a 60 hour work week

times 4.3 weeks in the month.

Caution:

If a dealer opts to pay a salesperson an hourly wage the dealer had better be on solid ground or Uncle Big Bro’s nephew, the Labor Department, will make the dealer wish he/she had never paid an hourly wage. And here’s why. If the salesperson is paid strictly an hourly wage overtime probably comes into play. If that holds true and overtime is not paid Big Bro’s nephew could be paying a visit.

Anywho if overtime does come into play the monthly wage would increase to $4,515 and the negative $13,471 difference would increase to negative $19,276 monthly.

So what is the answer – HOURLY WAGE or COMMISSION?

Back in my day when men were men and women were women, there was no hourly wage, no guarantees and no salaries. We did it the old fashioned way.

WE WORKED

Permalink Reply by NANCY SIMMONS on January 27, 2011 at 4:29pm

I have read all the answers here, and although they are all over the place, I like bits and pieces of each! Doug..I commend you for always putting so much time, research, and hard-core facts into your comments...bravo!

As everyone is unique, so are the dynamics of each dealership, even sometimes within auto groups themselves! If you consider a dealership with high volume and management on staff who knows how to structure deals to maintain high grosses, I believe a salary, plus commission, plus bonus compensation plan would work best to inspire and motivate more gross and volume. However, we know there are dealerships who give vehicles away like hot cakes, looking to turn, earn and increase volume at all costs, then we need to consider a fair sales compensation plan that is both in line rewarding the sales consultants for the time and effort put forward (if there is not a lot of gross in the deal), while working into the payplan bonuses designed to motivate all to fulfill the objectives and goals of the store.

As an example, many dealerships separate new car sales consultants from used and there is not an opportunity to reap the profits of a pre-owned sale, or another example is some pay demo allowances and a strong salary, while others pay draw which could equate to minimum wage. In closing, I believe, what works for one does not work for others, as so many facets of the business need to be taken into consideration, such as location, metro or rural, make sold, demographics of the community, etc...

Doug brings up a great point regarding employment law and the labor board compliance codes...which can get very hairy! Sunday rules and Blue Laws now come into play at time and 1/2 in most states????

Great conversation...Times are definitely a-changin'... Do we adapt our business to the culture of today...or adapt the mindset of today's career seekers to the lucrative possibilities of commissioned sales?