Designing pay structures in sales fields can be challenging in some regards because there different approaches, such as whether it is better to pay a wage or use a commission-based approach. When creating your pay structure for employees, several factors can lead to the right approach.

The Specific Job

Sales is a broad field, which can include everyone from sales associates at a makeup counter to high-level employees who handle big accounts. Determining the pay structure may partly depend on the specific job, perceived value, and motivation to make the next sale. For example, it's not uncommon to pay sales associates a lower wage with a higher percentage on commission. These jobs often have a higher turnover and a higher percentage on commission can be more motivating for sales associates.

In contrast, high-level employees who handle major accounts are generally considered to have significant value in the company. The type of work they do and their background, such as being highly-educated, often means they have more value within the company, necessitating a higher wage. On-boarding major clients at a lower commission rate can be appropriate, since these employees are likely highly-motivated anyway and a small percentage in commission typically translates into a high dollar amount.

Consider A Graduated System

A graduated system can work well for any type of sales job. In a graduated system, base pay and commission are based on performance. There may be overall benchmarks for performance, such as making a certain dollar amount or on-boarding a predetermined number of clients per year. Those who do not make their benchmark are paid their base salary throughout the year and are terminated after the year, as per their job requirement. Other employees who met their benchmark received their base pay throughout the year, but do not receive any commission from their sales. For more motivated employees who are good at their job, they might receive their commission at the end of the year based on a predetermined percentage. Seeing a running tally of commission throughout year can be motivating for employees, especially those who may have started out slowly, but can improve their performance before the end of the year.

Reward Team Performance

In some sales fields, the job does not rely on a single employee, but it might be a group effort. To increase motivation, you may need to develop a strategy that rewards the team equally for their efforts, which can eliminate unnecessary competition and the potential for a single employee to take all the credit, thereby securing a higher commission. When the team sinks or swims together, they are more likely to motivate each other since they will all play a role in landing the new client or hitting a benchmark. To prevent a situation where an employee slacks off but the team meets its benchmark, there should be individual benchmarks in place to determine whether a team member has contributed and is thereby entitled to their share of commission.

Setting pay structures in sales fields can be challenging because only paying a wage or commission is usually ineffective. Finding the right balance between wages and commission can help motivate employees while compensating them appropriately. For more information, you can reach out to salary consulting firms like Fox Lawson & Associates, A Division of Gallagher Benefit Services Inc.