The Wages of Design

While many kitchen and bath dealers, designers and distributors say they were drawn to this field out of a love for design, love doesn't put food on the table, pay the mortgage or send the kids to college. Kitchen and bath professionals want to be paid a fair wage for their hard work, and are ever mindful of the best ways to earn financial successes that match their creative successes.

So, what does it take to earn the “big bucks” in the kitchen and bath industry? Education, experience, certifications and NKBA membership all pay measurable dividends in terms of compensation, while creative freedom appears to come at a cost. Geographic location, too, plays a key role in overall compensation. And, of course, owning a firm is considerably more profitable than working at one – at least most of the time.

These are the key findings of three recent surveys conducted jointly by the Hackettstown, NJ-based National Kitchen & Bath Association (NKBA) and Kitchen & Bath Design News. The surveys, which collectively polled more than 1,700 kitchen and bath professionals, looked at salary, commission, benefit packages and more for kitchen and bath dealers, designers and distributors.

Dealer Compensation

For those looking to maximize earnings, kitchen and bath dealerships are the best place to work, according to survey results. Indeed, at $68,462 and $54,067, respectively, managers and employees at dealerships received higher average compensation in 2007 than their counterparts at either kitchen and bath design-only firms or distributorships (though the survey showed benefit packages were stronger among employees at kitchen and bath distributors).

Salary differentials were smaller for owners at kitchen and bath dealerships, with the average annual salary for owners totaling $118,227 (with the total number including value of perks received) during 2007, which is 3.4 percent higher than the average salary for owners of design-only firms, and 2.9 percent lower than the average salary for owners of kitchen and bath distributors.

Bonuses were not uncommon among the dealers surveyed, with roughly one-third (32%) of those polled saying they received a year-end or holiday bonus in 2007, with the average bonus totaling $4,621. Just 8.7% received a performance bonus last year, with an average bonus coming in at $6,441.

While managers and employees at kitchen and bath dealerships seem to have an edge when it comes to pay and benefits, they lost that advantage when it came to flexibility: Only 36% of managers and 38% of employees reported enjoying a flex-time arrangement, compared to nearly double that many design-only firm respondents who reported having flexible schedules.

But while flex-time is encouraged to enhance creativity, when determining who gets the highest pay, it’s not just about talent or creative expertise. Rather, experience is a defining factor in determining compensation. According to survey results, employees who had been in the industry less than five years made an average of only $39,609 per year in 2007, while those in the industry five to nine years averaged $51,593 and those in the industry 10-19 years cited an average salary of $61,041.
However, the benefits of experience seem to top out here, with those in the industry 20 years or longer averaging just $62,835.

Education also pays, according to the survey: Among the 55% of respondents who had a college diploma or better, the average salary was $83,477 in 2007, which is 3.4% higher than those with some college or less. Owners with a college diploma or better earned an average $122,326, compared to $114,192 for those who didn’t; while managers with a college diploma or better earned an average $71,175, compared to $67,912 for managers who didn’t. Non-managerial dealer employees with a college diploma or better earned an average $55,664, compared to $52,591 for employees who didn’t.
NKBA membership correlated to higher pay as well, according to the survey, which showed NKBA members earning an average of $81,172 last year, compared to $79,594 for those who weren’t NKBA members. Non-managerial employees who were NKBA members earned an average of $55,338, compared to $49,830 for employees who were not.

Not surprisingly, dealers employed a variety of different pay structures at their firms. Some 35.2% of dealer personnel polled were paid by straight salary, while another 30.1% were paid salary plus commission, and nearly 10% were paid commission only (see Graph 1). Just under 8% were paid on an hourly basis; 4.4% were paid an hourly wage plus commission; 3.1% were paid commission plus draw, and the remaining 9.8% were owners who took money from the business as they needed it.

Neither was there a clear consensus on how commission is figured. Nearly one-third (32.6%) of those being paid in whole or part through commission were paid commission on net profit, while 32.2% were paid commission on gross profit (see Graph 2). Some 30.1% were paid commission based on price, and the remaining 5.1% were paid commission based on some other method, often using a sliding scale.

The average amount of commission paid on net profit was 17.2%, the survey noted, while the average amount paid on gross profit was 13.2%, and the average amount paid on price was 4.9%.

When it comes to benefits packages, most dealers offered multiple benefits (see Graph 3), including a medical plan (78.7%), 401k (51.8%), dental plan (51.3%), prescription drug plan (42.7%), life insurance (36.3%), vision plan (30.6%) and profit sharing (18.1%). Fewer dealerships offered such benefits as a simple IRA (11.7%), pension (6.2%), ESOP (3.1%) or Christmas Club (1.5%).

While pension plans were rare, matched 401k plans were not: Some 43% of dealer respondents reported having a matching 401k, with the average contribution matched by the dealership 36%. Managers and employees said they were vested after an average of 8.1 months.

While dealerships seem to be generous with benefits, they appear to be less so with time off: Among dealer managers, almost 10 percent said they received no paid vacation in 2007, 32 percent reported no paid sick days, and 12 percent had no paid holidays. More than one-third of non-managerial employees (38%) received no paid sick days, while 18 percent said they had neither paid holidays nor paid vacation.

Likewise, in a tough housing market, pay increases were harder to come by. Of those surveyed, 41 percent of managers received a raise in 2007, averaging 3.3 percent, while 28 percent of employees received a raise last year, averaging 3 percent.

Of course ownership has its perks: In addition to being able to take more time off and enjoy higher salaries, the vast majority of dealer owners (68%) reported having a company car, compared to only 14% of managers and 5% of employees.

Designer Compensation

While many design professionals love the luxury of being able to focus exclusively on design, financially speaking, there’s a cost for that creative freedom. That’s according to the survey, which showed those working at a design-only firm seeing smaller average salaries and fewer benefits than their counterparts employed at a dealership.

The average salary for a design-only firm employee was $48,520 in 2007 – a notable 10.3% less than that of a kitchen and bath dealership employee. Neither were there huge variations in pay, with less than 10% of employees reporting salaries at $75,000 or more in 2007, according to the survey (see Graph 4).

Managers at design-only firms earned an average of $62,460 per year, according to the survey, which is 8.8% less than managers at kitchen and bath dealerships. However, nearly one-third of those surveyed reported earning $75,000 or more in this position (see Graph 5).

Only design firm owners saw comparable salaries to dealer owners, earning $114,201 per year on average, which is just 3.4% less than their dealer counterparts. However, owning a design firm is no guarantee of financial success, as nearly 10% of design firm owners reported making less than $25,000 in 2007, and roughly one-quarter made less than $50,000 (see Graph 6).

Additionally, the survey showed that when it comes to being a design professional, experience and certifications pay significant dividends. According to the survey results, certified personnel (CKDs, CBDs, etc.) earned an average of $87,470 in 2007, compared to $75,526 for non-certified personnel.

Likewise, experience was a key factor in compensation, with employees enjoying less than five years’ experience earning an average of $38,724 in 2007, with that number increasing commensurately with experience.

Again, compensation methods varied widely, with 29% of respondents paid a straight salary, 15 percent paid a salary plus commission, 9% paid an hourly salary, 8% paid commission only and 3% paid hourly plus commission. Another 26% were owners who take money from their business as needed, and the rest were paid by some other method, including various combinations of salary and bonuses.

Nearly 35% of those at design-only firms received a holiday or year-end bonus last year, with the average amount $1,662. Sixteen percent received a performance bonus during the year, averaging $8,544.

When it comes to pay increases, the vast majority (nearly 65%) said they did not receive a raise in 2007. However, those who did receive an increase averaged 5.5%, which is above the national average.

For those who did not get a raise last year, 49% had received a raise during 2006, 22% had received one in 2005, 8% last received one in 2004, 3% in 2003, and 18% had not received a raise since 2002 or before.

As for benefits, employees at design-only firms fared slightly worse than their dealer or distributor counterparts (see Graph 7), though the majority still received medical coverage (74.6%) and dental coverage (51.8%) as part of their compensation package. However, fewer than half had a 401k plan (44.2%), a prescription drug plan (40.6%) or a vision plan (32.7%).

Nearly one in three respondents got no paid sick days in 2007, and 29% received no paid holidays. However, the majority of survey respondents did enjoy flexible hours, with a whopping 66% of owners saying their employees were offered flextime arrangements, while 26% said they offer their employees family leave.

Part of the freedom of being a design-only firm is having the opportunity to work with different showrooms to enjoy maximum product exposure, and the vast majority of design-only firms took advantage of this. Indeed, some 70% reported taking clients to visit other companies’ showrooms in 2007, and those polled visited an average of 4.2 different showrooms over the year. A mere 12% of respondents went to only one showroom.

Distributor Compensation

The survey also polled some 450 owners, managers and employees at U.S. and Canadian distributorships, looking at salaries, benefits, commission structures and more.

The majority of those surveyed worked at companies that distribute cabinets (86%), countertops or blanks (72%), hardware (61%) and plumbing products (53%), while roughly one-third distributed lighting products (31%) and appliances (29%). Ninety-four percent said their firm had a showroom, while 75 percent said their firms sold retail as well as wholesale.

One of the notable results of the survey was the significant difference in pay between those working at Canadian distributorships vs. those employed by distributorships based in the U.S. Indeed, Canadian employees average $63,000 per year compared to their U.S. counterparts, whose annual salary averaged only $51,529, while owners of Canadian distributorships earned an average annual salary of $141,928, compared to $121,769 in the U.S.

Likewise, managers at Canadian distributors fared better than their U.S. counterparts, earning an average salary of $87,500 per year, compared to $66,363 in the U.S.

Even within the U.S., regional salary differences were significant. Among owners, average annual salaries ranged from a high of $141,928 in the West to a low of $91,936 in the Midwest, while owners in the Northeast averaged $131,796 annually and those located in the South averaged $118,274 per year. Significant salary variations were also evident, even within specific regions (see Graph 9)

Annual salaries for managers in the U.S. ranged from $73,437 in the Northeast down to $54,166 in the Midwest, while average employee salaries were highest in the Northeast ($68,461) and lowest in the Midwest ($42,868). Both manager and employee salary ranges were fairly constant, with only a small percentage deviating markedly from the average (see Graphs 10 and 11).

The survey also showed a wide diversity of compensation packages being offered by distributorships, with more than one-third (34%) of respondents paid a combination of salary plus commission, and another 32% paid straight salary. Some 10 percent were paid an hourly rate; 8% were owners who took money from the business as they needed it; 7% were paid commission only; just under 7% were paid hourly plus commission, and the remaining 3% were paid commission plus draw.

Even among those who receive commission as part of their compensation package, there were many variations on how that commission is figured.

Thirty-six percent of those paid commission were paid commission figured on gross profit, while 32% were paid a commission based on selling price. Another 25% were paid commission based on net profit, and the remaining 7% were paid commission figured on some other basis, most often a sliding scale.

The average commission paid on net profit was 9.6%, according to the survey, while the average commission paid on gross was 14.1%, and the average paid on price was 4.6%.

When it comes to pay increases, raises were generally well above the national average, with survey respondents reporting an average annual raise amount of just over $7,000 in 2007.

Unfortunately, the news wasn’t all good in this department: Only 36% of respondents received a raise in 2007, with a whopping 21% saying they had not received a raise since 2002 or earlier.

The word on benefits was considerably brighter, with 87 percent of respondents saying their compensation package included medical coverage, while 59% received dental coverage. Nearly 59% had a 401k, 49% had a prescription drug plan, 43% received life insurance, and 40% were offered a vision plan through their company (see Graph 8), Thirty percent said their benefits package included short-term disability insurance, 26% had long-term disability, and 20% enjoyed profit-sharing.

Respondents also reported an average of 8.9 paid vacation days annually, although 16% said they receive no paid vacation. Some 35% said they receive paid sick time.

Additionally, 36 percent of owners, managers and employees received a year-end or holiday bonus last year, with the average amount $6,977, while roughly 13% said they received a performance bonus during 2007, with that amount averaging just under $4,000.

Average sales volume in 2007 for the distributorships that respondents worked at was $3.3 million, and the average respondent accounted for 22% of the total sales there, or $724,376. The average number of accounts the distributors had was 256. Three out of four respondents said they call on accounts, and the average was 77 accounts.