The reason why companies love commissions is that they allow sales and new businesspeople incentive to succeed. Basic salary makes them too comfortable.
But, commissions only work if salespeople are successful. In that case, their commission checks can be significant. But it’s also when the problems will start to show up.
When some companies hire a salesperson, it’s done for the best of intentions. But while the company is too focused on an account win and the new revenues it generates; What often happens is that someone sees the money going out in commissions and realizes that it is a lot of cash.
It doesn't matter that the employee's salary was intentionally low to give them the incentive to get new business. No matter the businessperson base salary – the base is generally relevant to the experience and track record as the amount of commission. This is the way of how compensation works.
Companies can change the compensation method on the way because they are the ones with purse strings in their hands. In many cases, it doesn’t even matter what the original contract or offer letter says.
It’s logical that the company has often the bigger checkbook and therefore not susceptible to a lawsuit. More than that, most of the agreements between employees and employers state that there only payable if the salesperson remains an employee. It means that as long as commissions are due, the salesperson is essentially a captive.
If there is a possibility to choose, I would prefer experienced new business people with an excellent track record, rather than being on salary plus commission with year-end bonuses.
The other advantage of being the new business person is that you’ll be getting paid a decent or even high salary. It will give you a seat at the executive table and then they are not seen as a “hired gun” by prospects or other employees.
On the other hand, commissions are a good option for sales of one-time items - a single assignment that generates a specified amount of revenue or a sale of x number of widgets at a specified price.
Commission tracking software
If commissions end up getting because there is always a possibility to make commission tracking easier.
With commission tracking software, it’s easier to avoid confusion and errors when counting and calculating commissions for the sales department. With Blitz, it's easier to minimize errors and confusion in commissions.
You can request a free demo straight from the webpage or contact us now!