The Advantages of Commission Pay

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Commission pay is a method of reimbursing sales employees for the work they put in as well as encouraging top performance. Commission pay can be a percentage of a transactional amount or a set amount per unit. Employers can pay commission only or a base salary plus commission.

Higher Pay Opportunity

  • Sales professionals expect commission. For them, it's a perk of the job. Whether it's base pay plus commission or straight commission, the potential for pay is only limited by his sales talents. Commission only positions pay higher commission than base salary plus commission positions. The more sales, the higher the pay. With a salaried position, there is never a change in the pay. In an hourly position, the only way to increase pay is by putting in more hours on the job. Sales can accomplish higher pay without the burden of excessive over time.

Freedom

  • Sales professionals have more freedom to operate than their co-workers in clerical positions. Sales meetings take you out of the office from time to time. Your boss leaves you up to your own devices as long as the numbers are consistent. Entry-level sales, such as call centers and telemarketers, don't have this type of freedom. Freedom can also work against you if you aren't disciplined enough to get your work done before play.

Productivity

  • For employers, paying commission is an incentive to motivate employees to produce more. Employees are motivated to put in more effort to increase their income. Fewer meetings are scheduled for commission sales people than they are for salaried salespeople that have to attend strategy meetings and sales training activities to keep the pipeline full.

Weak Producers

  • Commission pay has a way of weeding out those who don't have the talent for sales. If the sales person isn't capable of earning a living wage from her sales, then she will quit and move along to a salaried position. You are left with the top earners. You don't waste money paying staff members that do not produce. You only pay for production. Your payroll is related to the value of the business you bring in because your top earners are earning their salaries.

References

  • "Managing Human Resources"; George Bohlander, Scott Snell; 2009
  • "Sales Management: Analysis and Decision Making"; Thomas N. Ingram; 2008
  • Photo Credit Jupiterimages/Photos.com/Getty Images
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