It is a decision that will transform the wages for up to 8,000 people in our industry. Carphone Warehouse reacted to murmurs of discontent from its rank and shop staff earlier in the year with a radical move to scrap commission.
The pay review was announced to Carphone employees last week and followed lengthy, internal mass emails urging all staff to demand higher basic pay, as well as complaints about the conflicting pressures of impartial advice and commission-driven sales.
Staff have also been unhappy with a strategy that has led to them being portrayed on television and forums as a company associated with mis-selling and commission-hungry salesmen. It is that image the company has always prided itself on being different to.
The new pay structure, under which Carphone store staff will receive a higher basic and no commission, is the retailer’s attempt to reclaim its position as the destination for impartial advice and good customer service. It’s a move away from the ‘hard sale’ and a shift towards increasing the focus on customer service. Carphone’s retail director, Steve Blan, says: ‘We want to go with the DNA of our business of giving great customer service.’
The retailer will introduce the changes in its London shops in October. The basic salary will increase and, instead of commission, staff will get a share of their store’s profits. The bonus for store staff will be made up of 2% of the shop’s gross margin divided between all the salesmen, based on the value of their individual sales.
Managers’ basic salaries will go up, but the bonus, which according to one Carphone sales assistant is 0.4% of the shop’s gross margins, will stay the same.
Managers based outside London will also see their pay structure change from October, but their store staff will only see changes from January 2009. Initially, the store staff’s basic salaries will increase by 50% and commission will be cut in half. If the London pay model proves successful, the rest of the country will move onto the same structure in April next year.
The new pay structure follows in the same direction as the changes Carphone made in February when it cut commission for sales and increased them for upgrades, in a move to reduce pushiness. At the time, these changes were welcomed by some staff, although others felt it would reduce their monthly income.
The complaints from Carphone staff about low basic pay were not completely unfounded. Before the salary restructure, the retailer had a reputation for having the lowest basic salaries. Carphone’s basic pay was £9,700, several staff members confirmed.
‘Carphone has always had a low basic. Their wages are notoriously behind the others,’ one recruitment specialist says.
However, the relatively high commission compensated for the low basic for good salespeople, he added. But those commissions were easy to attain when the mobile market was growing, new connections were everywhere and Carphone wasn’t under so much competition from the networks’ direct strategies.
Salaries at Phones 4u compare more favourably, but there is a much harder sales culture. Positions for Phones 4u salespeople in a London store are advertised with a basic of £10,400 and the possibility of up to £14,000 commission, reflecting the emphasis on selling. In reality, sales staff make an average of £400-£500 commission per month, according to one Phones 4u salesman.
JAG’s store staff earn a basic of £15,000 per year plus unlimited commission,
which has some salesmen claiming they take in a total of £60,000 per year, according to the recruitment specialist, although the typical salesperson earns
about £400 per month in commission.
The increase in Carphone’s basic salary is likely to take its staff’s basic pay to a similar level of the networks’ stores. Networks often don’t pay commission, but basics are much higher than at retailers like Carphone and Phones 4u. T-Mobile is advertising sales positions for £15,000 per annum plus bonuses, while O2 is offering a basic of around £12,000 with no commission.
The reason for the lower pay at networks is the different focus on service and retention. Basic salaries are now more important as sales dry up.
‘The role at the networks is more consultative than at Carphone or Phones 4u. The pay structure is also different because the networks have more margins to play with. T-Mobile pays more commission to Carphone for connections than it does to T-Mobile retail,’ the recruiter says.
All Carphone store staff can expect their basic to increase ‘significantly’ under the new structure, says Blan. The exact amount by which the basic salaries go up will depend on the size of each individual store, which some fear will create problems.
One Carphone shop manager points out possible conflicts that could arise from the differentiated levels of pay between shops. ‘There could be a lot of trouble with managers. The banding is at the regional manager’s discretion. Smaller stores in a lower band will lose out,’ the manager says.
Other retailers are also moving away from volume-based commission. 3 recently announced a trial of a new commission structure, where staff are paid according to how much margin they make, rather than the volume they sell.
A spokeswoman for 3 says: ‘The new structure is designed to improve the overall customer experience by encouraging sales associates to take on the customer’s individual needs before making any recommendations.’
Losing the best
There is speculation that the best salespeople will leave Carphone because a large part of their monthly income is currently made up of commission and removing it will result in a significant pay cut for them.
‘If Carphone is upping their basic and cutting commission they are going to get less dynamic salespeople. Good salespeople will earn less and bad ones will earn more than they used to,’ one HR source in the mobile industry says.
Some Carphone staff that Mobile spoke to said they were not happy with the changes because it meant lower monthly income for them. One assistant manager says: ‘It’s good for the majority of staff, but people that sell a lot will take a pay cut. Annually, I’ll stand to lose £ 1,500. If my wages fall, I’ll leave the company and the industry, because no-one else offers as much as Carphone with their old commission structure.’
As an assistant manager, he is also worried about losing the best sales personnel in the shop to companies that pay better commission.
The managers’ basic salaries will see a substantial increase and they also get to keep their bonus, although they will lose commission. ‘We will have managers earning as much in basic as they did in total last year – it’s great news for the managers. We’ll offer a load more basic and when your team gets to its profit target, you’ll get a share of that,’ Blan says.
Commission seems to harder to make under the current economic climate; as sales of handsets have been falling across all companies, commissions have also been hit.
Store staff have been complaining that making commission has become harder over the past few months. A higher basic pay also gives staff a safety net and the eligibility for things like mortgages.
Reaction from the shop floor
Carphone assistant manager: ‘It’s great. This will bring teams together and kick some of the lazy workers into life. Having a higher basic is going to make it much easier for us to get a mortgage.’
Carphone staffer: ‘It could split teams up if staff don’t like who they are working with. Stores could either re