Incentive use down in Motor trade

Incentive use down in Motor trade

Motor dealers have seen their pay fall over the past year as commissions and incentives were cut. This is not surprising given declining new car sa

Motor dealers have seen their pay fall over the past year as commissions and incentives were cut.

This is not surprising given declining new car sales in successive years. The pain was felt at the top.

The BDO Motor Retail Salary Survey 2019 revealed that the average salary for a managing director fell -14.6% to £211,000 while that of a dealer principal -12.6% to £97,000. These are significant falls, reflecting the downturn in business.

Dealers who took part in the survey ranged from single-site businesses to large publicly listed groups. The average remuneration package, excluding management positions, decreased from £41,000 in 2018 to £40,000 in 2019. All departments, with the exception of workshop, saw a stagnation or reduction in average pay, and management positions were also affected. Base salaries fell by just 1% but incentives saw a 9% cut.

The highlighted the north south divide with large differences in salaries in different parts of the UK. As you would expect London had the highest rate of pay. The average pay in the capital is 24% ahead of the national average, with the North and Scotland falling -15% below. That’s a 39 percentage point swing, which is remarkable.

The BDO survey flagged up the impact of the increased national living wage on their businesses with the rate expected to increase by 6% in April 2020. Steve Le Bas partner, motor retail, BDO LLP, said: “In the last couple of years we have seen persistent increases as a result of living wage increases and a labour market reaching full employment. However, with squeezed margins and declining new vehicle sales, it is not surprising that overall salary packages have fallen as they are still very much biased towards commissions.

So much for 2019 What’s in store for 2020. According to Le Bas, we can expect more of the same.

“Our expectations for the coming year are for further stagnation as a result of the continuing difficult market conditions and the prevailing general economic and political uncertainty.

“With the challenging trading climate for dealer groups across the country it is perhaps no surprise that for the first time in five years we have seen a fall in the average pay.

The survey looked at how long staff spent at work. On average employees worked a 41-hour week and received 24 days holiday, no change from 2018. It found that 42% of employees receive car benefits (2018: 40%) with 69% of employees receiving other benefits (73%). The proportion of employees paying into a pension scheme has now risen to its highest level at 94% (87%).

The survey highlighted ways that dealers can provide benefits in attractive ways for employees. One scheme is salary exchange where employees agree to give up a proportion of their annual salary in return for a non-cash benefit. This leads to a cut in income tax and National Insurance Contributions (NIC) for both the employee and employer. Under HMRC rules, only pension contributions, cycle to work, workplace nurseries and childcare vouchers for employees enrolled before 4 October 2018 can be provided in this way.

The also makes reference to the Bonus Waiver Scheme, which is similar to salary exchange, rather. Instead of the employee taking a cash bonus it goes into the pension scheme as an Additional Voluntary Contribution. And finally, it points out that employees can buy extra holiday via salary exchange, which helps on a personal level while also reducing overall salary costs.

This post was originally featured here