Commission is the best type of remuneration to attract and retain sales candidates. Employers should compensate their sales team for each sale they make or risk missing out on competitive, motivated candidates.
Commission is the best type of remuneration to attract and retain sales candidates. Employers should compensate their sales team for each sale they make or risk missing out on competitive, motivated candidates.
There are several types of commission plan you can implement. Which one is most suitable depends on the nature of your business and your employees’ experience. Deciding which one to choose can be challenging. Often, a combination of different commission plans, along with a base salary, create the perfect remuneration package.
Flat commission is the most common form of commission, and refers to offering the same percentage of commission for any kind of sale. Whatever the amount a sale earns your company, your sales professionals will always receive a fixed percentage of the sale, for example, 3%.
Tiered commission refers to paying higher commission for higher priced sales – the more money a salesperson makes in a certain bracket, the higher the percentage. After reaching a certain amount, they could earn a higher percentage.
This is a good way to reward higher earners and eliminate ‘sandbagging’, where your sales team will report sales all in one month for a higher percentage commission.
Hybrid commission is a combination of flat and tiered – you could pay your sales reps tiered commission until they reach a certain goal, then you can cap the extra commission. This saves money, avoiding a scenario where your employee earns more than you can afford to pay.
Any cap or limitation on commission can come with the risk of your professionals only selling a certain amount in a period of time and lacking motivation, as their excellent performance is not being fully rewarded.
Multiplier commission – commission percentages can be doubled, depending on the product lines. For example, if an employee sells home and car insurance at once, they could earn a percentage for each. This motivates your team to work in a broader way and expand their networks in different aspects of sales.
Straight commission is commission without salary. You pay commission based on each sale, completely uncapped. This is great for motivation, as it can be incredibly lucrative, although professionals will need to work hard consistently to be regularly well-paid. Candidates tend to respond highly to straight commission offers if they are confident in their own ability.
Offering both salary and commission can be more desirable depending on the circumstances. Sales professionals are more likely to be attracted to the prospect of an additional base salary for stability and to recognise their hard work outside of successful sales. This could be just as important to your sales employee’s motivation as recognising their successes.
Alternative sales remuneration
Most salespeople will have multiple tasks outside of closing deals, including cold-calling prospective customers and following-up with those who’ve already bought a product or service. These aren’t tasks which directly make money, so they are sometimes overlooked, but they still contribute to the overall company profit and customer satisfaction.
It’s increasingly important that your team focuses on the needs of your customers and humanising the customer experience, without overselling and losing their trust. Building these kinds of relationships can take time. Paying an additional salary shows that you value the time and effort that goes into each sale, rather than just the end result.
Profit and commission sharing are forms of payment similar to an annual bonus; company profit or the collective commission earned in a team is divided among the sales team. They are usually annual, whereas commission is more immediate – monthly or quarterly. This is more rewarding to professionals who see it as a direct result and recognition of their hard work.
Many employers find that profit or commission shares can build teamwork among salespeople – helping others succeed in making sales will benefit the whole team. But this can demotivate the highest earners, who will see their earnings reduced if other team members aren’t performing. Other earners may also start to lag, as they know others will support them. Salary alone doesn’t work for sales roles, for the same reasons.
With so many remuneration methods and incentive schemes for sales teams, it can be difficult to choose the right one. It depends on your business, your employees, your company profit and many other factors. Commission may cost more than just a fixed salary, but you will see the return on investment if you implement it correctly.
By paying commission or performance related bonus, more candidates will be attracted to your business, you will increase your employee retention and you will motivate them to make you more money.
If you’re looking for a talented sales candidate or your next career opportunity, find your nearest Reed office.
