​ Salary Vs Commission: Which is Best for Business?

​  Salary Vs Commission: Which is Best for Business? Parallax Image

To get the great performance, especially when it comes to sales, you need to incentivise workers. For many businesses, that means using commission-based remuneration packages, but while this does ensure healthy sales figures, because the salesperson is focussed solely on convincing customers to buy, customer service can take a back seat. Over the longer term, this can detrimentally impact footfall, loyalty, long term sales and potential new business, as customers are scared off through heavy handed sales tactics and a lack of focus on providing a service that really meets consumer need.

Keep your best staff on-board

Perhaps more significantly, commission-only pay puts employees under intense pressure, especially when there is a fall in demand for your product or service. When staff see their take home pay fall, they are more likely to look elsewhere for a better deal and this could mean losing your best staff to your competitors. A steady salary provides stability and security and that means happy employees. And, as every good boss knows, happy employees are more productive and perform better than ones that aren’t satisfied in the workplace.

If members of your sales team require specialised technical knowledge of products, or have a long term relationship with high paying clients, then it is in your interest to provide them with a substantial salary package, as a rival will be only too happy to poach hard-to-source expertise, or worse still, your best clients.

Rewarding exceptional performance across the board

It’s also important to realise that while salary is essential to retain staff, commission is needed to establish performance standards. Wherever possible, this should be done both for sales, customer service and for employees that can deliver measurable value to the company through feedback or ideas for improving how efficiently the business operates or generates sales.

Typically, the average split within sales tends to be around 70/30 in favour of salary remuneration mode. However, this will depend on the individual’s role and what they’re selling. You may need to tweak the balance in favour of commission for sales closers or towards salary for those focussed on cross-selling, loyalty and service.

Of course, all of this will depend to an extent on your business model, what you sell and the value of each sale. And talking of figures, remember to tie commission to a percentage of revenue or profit. You don’t want to offer so much commission that you don’t make a profit. That said, make sure the commission structure is clear, attractive and always pay employees when due.

Getting the balance right

Base pay can have its setbacks too. Remuneration based on salary alone can make it difficult for managers to distinguish between the best performers. There needs to be an incentive in place for employees to outperform their colleagues and show what they’re really capable of.

As with so many things, it’s all about striking the right balance. Creating a remuneration package that combines both a salary and commission-based earnings, one that drive sales, helps you attract and retain the best sales team, but also one that focusses on delivering great customer service and positioning your company as the brand of choice. 

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