Emily Clarke

Understanding Which Commission Payments Work Best For Your Business

Commission payments provide excellent incentives for your top sales professionals, but how you pay out commission contracts can have a big impact on how successful your strategy works. Also, how you structure other compensation alongside commissions can change the way that commissions incentivize your sales professionals, sometimes leading to detrimental outcomes.

If you're feeling unsure about your current commission contract management plan, below are some things to consider:

Be Careful With Salary Caps

Because you're paying commissions, you might think that capping salaries are a good trade-off. After all, commissions should be the carrot to dangle in front of your sales team, right?

The problem is that salary caps can demotivate sales professionals. If they know that there's a hard limit in the future, they may decide that it's just not worth pursuing only commissions as a form of pay raise when the limit is reached.

Base Pay, Relative, or Straight-Line?

There are many different commission plans out there, so which one should you use? The truth is that this differs from company to company.

A base pay plan will include base pay along with commission, relative plans pay commissions relative to the amount of a quota met by a salesperson, and straight-line plans reward your sales team based on performance irrespective of quotas.

Choosing the right plan may come down to what kind of performance you currently receive and what kind of performance you're after. Additionally, different sales professionals react differently when working under different plans.

Keep Things Simple

No matter how you approach your commission contract management, try to keep things as simple as possible. No one wants to be left guessing about their paycheck, and complicated, convoluted commission plans will do nothing but confuse and frustrate sales professionals.

Instead, try to boil things down to the basics. If a salesperson does this thing, then that thing will happen. There will be certain situations where this level of simplicity isn't possible, but the goal should always be to lay things out in easy-to-understand terms.

Author Resource:-

Emily Clarke writes about business software and services like commission tracking platforms, softwares etc. You can find her thoughts at commission system blog.