However, there is no one-size-fits-all compensation plan. Each business owner will need to consider myriad factors when deciding on how to compensate sales employees, including industry, company size, sales cycle length, and more.
To help ensure that you design a compensation plan that’s best for your company and your sales department, here’s a breakdown of different options you may want to consider.
This type of compensation plan is most often used when the industry you operate within prohibits direct sales, when sales people work as part of small groups or teams and all contributions are equal, when your sales team is relatively small, or when your sales people are expected to spend much of their time on other responsibilities other than selling.
However, these plans don’t tend to offer motivation to sales people, as there are no incentives for them to work harder.
Organizations use salary plus commission sales compensation plans when there are opportunities to support all sales people on this structure and when there are proper metrics in place for tracking sales to ensure that the splits are fair and accurate.
This type of plan is often the better choice as opposed to straight salary because it offers motivation to increase productivity and to achieve goals. It also offers more stability—sales people will still get some type of pay even if they’re in training, when sales are low during certain months, or if market conditions get volatile. However, it can be more complex to administer.
These types of plans are easier to administer than salary plus commission and provide better value for your money paid as they are based solely on sales achieved. They also tend to attract fewer candidates, but do attract the most top-performing and hardest working sales professionals who know they can make a good income because they know how to sell. On the other hand, though, they can create aggression within your sales team and low income security, which can lead to a high turnover rate, and sales rep burnout from stress.
About the Author:
Rhys is a tenacious, top performing Senior Sales Recruiter with 11+ years of focused experience in the Digital Media, Mobile, Software, Technology and B2B verticals. He has a successful track record of headhunting top performing sales candidates for some of the most exciting brands in North America. He is a Certified Recruitment Specialist (CRS) and has expert experience in prospecting new business, client retention/renewals and managing top performing sales and recruitment teams. Rhys enjoys spending quality time with his wife, son, and two daughters, BBQing on a hot summer day, tropical vacations and cottaging.
Disclaimer: The views and opinions expressed in this article are strictly those of the author. CPSA does not endorse any of the companies, products and services mentioned within this article.