The Need for Clear-Cut Pay Plans

The Need for Clear-Cut Pay Plans

Employee compensation and benefits are among your most significant expenses and yet having a motivated and skilled staff is critical to your business success. How do you find the right balance? NADA Compensation Study 2009 serves as an invaluable resource to help you assess your situation and balance those needs. Please note two additions to this years guide:

NADA chief economist Paul Taylor has significantly expanded the introductory analysis section to provide you greater insight into the data.

An entirely new section is provided on pay plans, including the excerpt below:

For purposes of avoiding misunderstandings with employees, the importance of legally-sound pay plans cannot be overstated. Moreover, dealers must pay close attention to the rules relating to wage and hour law, which can be deceptively complex. The Fair Labor Standards Act is the primary federal law in this area, but some states have rules that are different from or stricter than the federal.

A typical dealership uses a variety of pay plans. Some of these, such as those for employees primarily compensated on commission, revolve around complex accounting concepts involving a defined gross or profit. In part, dealers use pay plans to motivate employees to exert their greatest efforts”and subsequently to reward them for doing so. For example, salespeople paid on a commission basis receive a portion of the gross or profit on each vehicle sold. Most dealership salespeople clearly understand that they are being paid on a commission basis and that their compensation is tied directly to their production. However, unless key details are spelled out with well-defined terms in a legally-sound pay plan, salespeople may not fully understand all of the parameters of their compensation.

While the NADA Compensation Study 2009 provides a national overview of the basic concepts that should be covered when drafting pay plans, it cannot cover all of the details needed to craft a legally-compliant pay plan and it does not constitute legal advice. Dealers are strongly encouraged the have their compensation plans reviewed by competent counsel for compliance with federal, state, and local law. Note that WANADA teams up with NADA for providing a regional version of their national Compensation Study, which, too, will be out in the new year.

The NADA Compensation Study 2009, provided free to all NADA members, will be mailed at the end of December. To order additional copies of the guide through January, please visit www.nada.org/mecatalog or call NADA at 800-252-NADA, ext. 2.