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Some companies say that high salaries are what encourage sales people to do their jobs well. However, how could one be satisfied when he or she doesn't get any profits from the product sold? Which do you think is a better compensation package for salespeople - base salary with commission or high salary without commission?
Paying a decent base salary with commission will save your company lots of money. Plus, the commission can be a motivating factor to salespeople that will help them boost their sales. Most importantly, your sales staff receives a fair amount of salary plus extra money from the commissions.
3 Ways on Benefiting from Paying Base Salary with Commission
A base salary with commission is definitely more rewarding than a commission-based salary. A sales person can still earn the base salary even if he or she didn't sell a thing. Here are ways on how you can also benefit from this kind of compensation package setup:
By giving base salaries plus commission, you motivate your sales staff to sell more of your company's products. When your staff feels motivated, they practice their sales pitch, do more sales research, and build more relationships with other target clients.
Admit it, you are more assured with this compensation package than the others. This is because you are certain that you are paying for true sales. You don't give commissions if no sales were made.
You save more money. Here's why:
Holiday bonuses are based on base salaries alone. A small base salary means giving a small holiday bonus. No commissions included.
Sales go up and down every month. If you're in the real estate business, there are times when there are no monthly sales. By paying base salaries with commission to your staff instead of very high monthly salaries without commission, you save money because you don't have to constantly release a big amount monthly.
If sales are coming in, you give your employees a commission, but remember that the amount of money that's coming in is a lot more than the money that's going out.
Smaller base salaries mean lower expenses. You can definitely add in some more useful expenses that can benefit you and your company so your tax can be smaller. The bigger the expenses of a company, the lower the tax. This is because a business owner usually excludes all expenses first before declaring their federal taxes.
Action Steps to Evaluating Paying Base Salaries Plus Commissions (Instead of High Salaries Without Commissions)
1. Evaluate your line of business. Is your small business really dependent on sales by your marketing staff? If so, you need to really come up with a scheme that motivates them to make more sales.
2. Sit down and make list of pros and cons to paying base salaries + commissions instead of handing out high salaries without commissions.
Important Points to Evaluating Paying Base Salaries Plus Commissions (Instead of High Salaries Without Commissions)
- It can motivate your sales team to try harder to make sales.
- It saves your small business money because you don't have to pay high salaries.
- Commissions are based on actual sales so any money going out, has already come in (or is in the process of coming in)
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