Commission Versus Salary

Ask any salesperson or business developer if they’ve ever longed for the certainty of a regular paycheck, instead of earning commissions. They’ll likely tell you that when times are tough they dream at night of a guaranteed salary.



Now ask any regular employee if they wish they could make more money based on their personal performance. Probably they’ll say that in good times, they yearn for commission income because it could far exceed their fixed compensation.



Two perspectives, two different ways of looking at pay. Which is right? The one that best suits your style, circumstances, and stomach for risk.



Gone Fishin’ For Commission



A sales job is where you are most likely to earn commission. Basically a portion of your pay, ranging from a small amount to a full 100% of your compensation, depends on the total dollars in revenue that you bring in to the employer over a given period of time.



Generally you would receive a financial incentive for the sales that you make during that timeframe. This could be either:



• A percentage of every dollar in sales you generate

• A flat fee for each sale you make

• A periodic “bonus” if you exceed pre-determined sales quotas



For people who are confident in their selling skills – and who don’t lose sleep worrying about where their next paycheck is coming from – a higher level of commission brings the possibility of greater rewards. The rest of your compensation is paid as a “base salary.”



Put The Onus On Your Bonus



If you are an employee who is not in sales and you are paid a fixed salary, your employer may still offer a “bonus” plan of its own. Sometimes this incentive is based exclusively on your personal performance. In other cases the amount of bonus you qualify for depends on the performance of your team, division, or the entire organization.



Money is by far the most popular incentive. However some employers offer prizes instead, such as paid trips, gift certificates, extra time off with pay…the range is wide. In each case the purpose of the bonus is similar: to encourage you to work harder, produce more, and increase the quality of your output.



Not All That Glitters Is Commission-Based



So which pay plan is right for you? High commissions are great for those in sales who want unlimited earnings potential. But customers can be wary of salespeople who push their wares merely to jack up their earnings.



A fixed salary is nice if you’re the kind of employee who prefers a predictable cash flow. You may not get rich quick, but at least you’ll know that if you keep your job, next month you’ll get paid the amount your employer has promised you. Plus you may get a bonus on top of that, depending where you work.



Either way – mainly salary or mostly commission – the pay package you pursue ought to match your goals and personal style. That way it truly will be an incentive plan, not stress-producing glitter.