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INSIDER INSIGHTS

PAYROLL: DISCOVER THE COMPETITIVE ADVANTAGE HIDDEN IN YOUR BIGGEST EXPENSE

Payroll can account for an average of 60% of a dealership’s total expenses. Streamlining how compensation and benefits are managed is an untapped tactic to boost employee relations and the bottom line.

Dealership managers are laser-focused on procuring vehicles and parts inventories with margins in mind. Marketing campaigns are carefully scrutinized to make sure every dollar produces results. Yet, dealerships’ largest operational cost – payroll – is often thought of as a “necessary evil” and gets little attention. As long as checks get cut on time, everything is OK, right?

Not necessarily.

Payroll can account for an average of 60% of a dealership’s total expenses.¹Payroll systems are typically viewed as simply a way for the human resources (HR) team to administer employee compensation. Some rely on outdated spreadsheets to manage the process. Others wrestle with large enterprise-level systems that have too many bells and whistles and not enough auto-industry-specific features.

What many dealers do not see is the opportunity hiding in payroll and benefits management to create competitive advantages by streamlining inefficient processes, realigning human resources to focus on talent retention, and reducing compliance risk.

Payroll can account for an average of 60% of a dealership’s total expenses.

Breaking the Stereotype

It’s no secret that dealerships struggle to hire and retain qualified employees. In a market where unemployment is low, the pool of candidates is already limited. Plus, a Hireology / Cox Automotive study reveals that only about one in 100 people would consider working for a dealership because of their perceptions of what it’s like to work in the industry.²

The only way to solve the issue it to address it head-on. Dealers develop strategic plans to manage margin compression, customer loyalty, and F&I efficiencies by leveraging data from their dealership management system (DMS). Now it’s time to use the same approach to improve employee relations.

By integrating the DMS with the HR management system, dealers get more accurate visibility into how employees are compensated, with which they can make better long-term decisions.

And the payroll process is greatly simplified, freeing the human resources team to focus more on culture-building initiatives that appeal to current employees and potential recruits.

Building a Competitive Advantage

The automotive industry is evolving along with changing market forces. Younger generations are less interested in commission structures and want the comfort of pay stability, benefits, and work-life balance. Dealerships seek ways to respond that address these desires that workers can find in other industries, but still motivate employees to meet sales and service quotas. It’s a fine line.

Integrating the HR system with the DMS can help find a balance that works for dealership management and team members while creating a competitive advantage in the following areas:

Streamline operational expenses and tasks
Most human resources teams pull double duty entering data about commission plans / pay structures, schedules, time off, tax withholding, and other key data into multiple systems. It’s a never-ending, time-consuming process that is prone to error. The American Payroll Association estimates an error rate of 1–8% of gross payroll.³

Dealer managers usually have little visibility into how the process is managed because they rightfully rely on comptrollers or payroll management personnel to handle the function.

The integration of the DMS with the HR system streamlines how data about sales is filtered into the commission equation, minimizing the impact of human error from duplicate data entry.

Overall visibility into employee management is improved, enabling managers from multiple teams to more easily pinpoint operational inefficiencies by assessing metrics that are valuable to them. For example, sales managers can see which team members are nearing overtime. HR leaders can evaluate what benefits are not being used and adjust plans. General managers can see trends in turnover based on a number of factors such as role, manager, and commission structure.

Also, it’s not uncommon to hear horror stories from payroll managers about the excessive amount of time it takes to process checks every two weeks. Many note they spend 60–75% of their time every month just making sure payroll is accurate and issued on time.

HR systems that are integrated with the DMS can greatly reduce the amount of time spent on processing payroll and managing benefits. The HR team can then shift their focus to creating much-needed employee engagement programs.

For example, the Kingman Honda dealership in Kingman, Arizona, reports recouping about one day worth of work every week after switching to another DMS. The efficiencies come from more straightforward car deal posting processes and bank reconciliation, easier accounts payable, simplified cashiering, and faster, more direct vehicle stock-in processes. Essentially, updating data in one system automatically syncs data with other systems such as payroll.

Boost talent retention
Employees want to feel like they are in control of their careers. Dealerships that proactively address talent retention are more likely to see better overall results because employees are satisfied, motivated, and understand what is expected of them.

The integration of the HR system with the DMS enables dealerships to provide transparent views into their schedules, compensation structures, and benefits from personalized dashboards that they can log in to and view. Managers and employees have access to the same information and can have open conversations based on data if questions or discrepancies arise.

These types of solutions are commonplace in other industries where companies compete for qualified candidates. New employees will expect technology-enabled onboarding, the ability to check their benefit status online and a user-friendly interface for HR-related tasks. Dealerships need to provide this type of solution for employees to stay current with workplace trends.

Accurate performance and compensation data is also a valuable tool for managers to review and proactively facilitate conversations with employees about what’s going well and areas for improvement. It’s an opportunity to shift the culture to a spirit of coaching and feedback.

Reduce compliance risk
Are you 100% confident your payroll system is 100% accurate all the time? If not, you have a compliance risk. Keeping up with constantly changing state and federal regulations is challenging. Dealerships are open to steep fines or lawsuits, even for what may seem like simple mistakes.

The probability is so high that many dealerships keep a law firm on retainer just in case compliance issues arise.

By integrating the DMS with the HR system, you eliminate the need to manually track compliance updates. An integrated talent management solution automatically populates the relevant modules with updated information such as tax compliance, minimum wage, overtime regulations, equal employment opportunity compliance, employee verification, and other important compliance directives.

Get More Information
When so much of your capital is invested in people, shouldn’t you be 100% confident that the systems used to manage payroll and benefits are accurate, streamline processes, and provide insights that enable the dealership to build a competitive advantage?

To learn more about strategies for recruitment and retention, read “8 Keys For Hiring & Retaining Staff at Dealerships.

1. NADA. “NADA Data Annual Financial Profile of America’s Franchised New-car Dealerships.” 2018.
2. Hireology. “Cox Automotive Dealership Staffing Study.” 2017.
3. Katz, Eyal. “Payroll Errors That Cost You Money and How to Fix Them.” Business 2 Community, 2017.

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