The Pros and Cons of Paying your Sales Team Commission

The majority of small business owners pay their employees a fixed salary, based on an hourly or annual rate. However, if your company requires a sales team, you should consider introducing a commission-based payment structure. There are a number of benefits and consequences of paying commission to your sales staff. Profits could rise, but there is a significant risk that the company culture will suffer.

Pros of Commission

  • Profits are likely to rise following the implementation of a commission structure. Money is perhaps the greatest incentive of all, and employees generally work harder when their personal finances are hanging in the balance. However, this also depends on the individual worker – so be sure to hire ambitious and enthusiastic salespeople.
  • Hiring commission-based staff is a relatively low-risk endeavour. Although many employers offer a basic annual salary alongside the commission package, this is generally far lower than a standard wage. As a result, if the new hire fails to live up to expectations, the company loses less money than with a regular employee.
  • Companies with a commission-based pay scale will have fewer managerial requirements. The best salespeople are highly independent and self-motivated, and usually work best alone. They can effectively manage their own clients and accounts, with little input from an external manager.

Cons of Commission

  • Commission provides employees with a solid financial incentive to work hard and contribute to the company’s success. However, it doesn’t necessarily promote loyalty to the business. Commission-based sales staff will readily move on to another company if they are offered a more lucrative pay scale.
  • A commission-based pay scale often increases staff stress levels – particularly if the base salary is small. This can lead to a poisonous workplace atmosphere, increase stress-related illnesses, and even create a high employee turnover rate.
  • Many business owners try to cultivate a cohesive team spirit amongst employees. However, when commission is at stake, rivalry and unfriendly competitiveness can take root. Conflict can also arise if salaried and commission-based staff members work together.
  • It takes a certain type of personality to succeed in the fast-paced world of commission-based sales. As a result, your team will largely consist of similar personalities and skill-sets. However, in small businesses, it is wise to introduce a wider range of skills and experiences.

Commission schemes often have a negative effect on staff retention and workplace atmosphere. For some business owners, a cohesive team of loyal employees is extremely important. In this situation, you should trust your sales team with a full salary. However, you should make it clear that sales targets must be met, and introduce measurable quotas for easy comparison.

If you believe in sacrificing a healthy workplace atmosphere and culture for larger profit margins, then introducing a commission-based pay scheme could be a wise decision. Your employees will be independent, hard-working, and self-motivated – but also less loyal to your company.

This post was written by Jade Symons of Westminster Live, an internationally recognised television studio based on the banks of the River Thames.

 

 

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