What to pay your design staff?
Once you’ve found the right people to fill the vital design roles within your business, the next big step is to decide what, and how, to pay them. Paul Da Silva explains how to tackle this potential minefield.
Since setting up my own consultancy business, I would say that recruitment is the area of business planning about which I have received the most enquiries.
I’ve worked with some of the large national retail chains as well as independents and luxury multiples to help them recruit the right people to fill vacancies in their businesses. And, there is a common theme among almost everyone I have spoken to – no one is quite sure what they should be paying a kitchen or bathroom designer.
Should it be low basic, high commission? Should it be high basic, low commission? Should it be high basic, high commission? Should the commission be paid monthly, quarterly or annually?
Should there be a minimum threshold that the designers need to hit? Should we pay on sales or on profit? And that’s without all the variables around mileage, holidays, working hours and other aspects that a potential candidate will consider before making any move.
Geographical factors also have a strong influence on this. The salary you could be expected to pay a designer based in Newcastle may be vastly different from what you might be expected to pay a designer in Cornwall, for example.
I’ve been asked recently to review some commission schemes before they are rolled out and some of them have been so complicated that I felt like I needed to roll a six to start.
Speaking as a salesperson myself, one of the main points is that a commission scheme needs to be transparent and easy to calculate.
During my time as a salesperson, if I’d had a good day, I wanted to be able to calculate how much commission I’d earned on my drive home. I didn’t want to have to wait for the commission slip to come through for me to then have work out if there were any errors – which, inevitably there often were and, rarely in my favour.
My personal belief is that a retailer should always try to offer a healthy basic wage. My other bit of advice here is that retailers should be prepared to be a bit flexible on that figure, for the right candidate. I speak to companies who say that they will pay up to £25k basic wage. And I might have a perfect fit for them who wants £28k to move but the client says no.
And I never understand it. For the sake of £3k, they may be losing out on a top-performing salesperson. And let’s say that retailer is working to a margin of 40%, they would need a sale of just £7,500 to cover that cost.
Be generous, you definitely get what you pay for
I have worked with a few people who thrive on commission-only sales, but they are very few and far between. Most people want a solid basic, so that they are comfortable in the knowledge that their bills are covered, then they can concentrate on selling.
Low or no basic salaries come with added pressures. I’m sure most of you will remember the stories of designers, who were paid by certain KBB retailers on a commission-only basis, having to be forcibly removed from a customer’s home, so desperate were they to secure a sale.
For me, a designer’s commission should always be a percentage of the sales they make.
If, for example, a company offered me 2% of everything I sold, and I sold £100k in a month, I know I would earn £2k. Easy.
If, however, a company told me that I was earning 2% of the profit from the sale, I would be less comfortable. How do I know what the profit is? What if there’s an error beyond my control?
What if I use eight different suppliers for that one project? Do I need to go through and calculate the profit on each separate product?
Now, I understand for some showrooms, offering commission based on profit is a lot safer than offering a percentage of sales. There is a valid concern that if you pay designers commission as a percentage of sales rather than profit, sales might go up, but margins will come down. A valid concern however, in my view, it is the responsibility of the management team to put controls in place to protect profit.
I know some companies that pay an annual bonus with no monthly incentive, and I also know some who pay quarterly and some who pay monthly. My advice would be to pay commission on a monthly basis.
For me, monthly is the most transparent and easiest to manage as a company and a salesperson. There is a certain amount of “banking” of sales that goes on with most salespeople. Their January number is safe, so a little bit gets put away to give them a good start to February. It’s not a perfect situation, but it goes on.
If you are paying quarterly commission, if somebody has a bad February, suddenly sales are being banked until April, and that’s not good for a business.
In summary, I believe that retailers – especially those who want to ensure they are bringing the best people into their business – must aim to be generous with salary and commission packages.
Vacancies are starting to outnumber candidates now, and you will definitely get what you pay for.