Salesperson Compensation - Explained
How to Compensate Salespeople?
Written by Jason Gordon
Updated at September 4th, 2021
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How are Salespeople Compensated?
Companies generally employ any number of methods for compensating their salespeople. Some of the most common methods of salesperson compensation include:
- Salary - Providing a salary as the total compensation paid to a salesperson for performing her duties.
- Commission - Compensating a salesperson with commission means that their sole compensation is based upon a percentage of the total value of sales made. The percentage and method of calculating this percentage will vary based upon the nature of the product and industry.
- Combination (Salary and Commission) - This means providing a base salary to compensate a salesperson for their efforts. In addition, the salesperson will earn a specified percentage of their total sales. The method for calculating this percentage may vary widely. For example, some companies require a minimum value of sales before the commission begins. Other companies create tiers or scale up or down the commission based upon the sales volume.
It is important to remember that the purposes of these unique salesperson compensation methods is to adequately incentivize the salesperson to perform at their best. For this reason, the method chosen will vary based upon the industry, competitive environment, and product lifecycle.