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Best practice for paying employees commission

Sales team smiling in the office

By Jools Tait, Business Development Director

Paying commission to employees in positions such as sales, is often considered to be a good form of performance motivation. On the flip side, this can cause stress to individuals who may struggle under the pressure of an unpredictable income that fluctuates from month to month.

In this article we’ll explore what employers can do to support those who are paid commission as well as offer suggestions on how best to go about it.

Why should employers take note?

Financial health is the biggest reason why people get in touch with Ben. It tends to account for half the requests for help we receive. We are often contacted by people with fluctuating incomes who are struggling to budget. A high proportion of them have got into debt because of this. Companies who support their staff on a commission paying role have the potential and capability to help them remain financially stable. This will help their overall wellbeing.

From a business perspective, employees who are worried about money are less likely to be able to fully concentrate on their work and this could affect their performance. Additionally, we know that financial stress tends to have an impact on other aspects of a person’s wellbeing, for example their mental, social, and physical health. If this happens, an individual may be more likely to take time off work due to illness.

Pay commissions promptly

Waiting to be paid for work can be demoralising, demotivating and – for someone relying on the extra income – extremely stressful.

If possible, aim to pay employees sales commission as part of monthly pay check. This makes the changes in income less dramatic and less of a wait to receive the reward for their hard work.

Paying commission to salespeople quarterly or only after a customer has completed their financial transaction disconnects the extra income from the work done. It can also cause frustration, which is best avoided in a profession which has a traditionally high turnover of staff. Keeping employees happy means you’re more likely to retain them and their valuable expertise, which helps provide stability to the business.

Best practice for sales quotas

A quota is the number of sales that an employee is expected to make during a certain period of time. By providing a clear goal and giving guidance and clear sales expectation, this can help to increase sales.

However, a quota can also mean that salespeople may ignore key tasks that don’t directly contribute towards this, such as customer care and prospecting leads. An unrealistic quota can also reduce incentive, morale and this can lead to unnecessary stress.

When creating a sales quota, a good practice includes:

  • Looking at the average sales figure per employee over the last year
  • Taking economic factors such as the state of the economy into consideration
  • Looking at an economic impact indicator on the regional and local area
  • Involving sales management in the creation of their own targets.

Avoid raising the monthly quota when the target is achieved. This can result in a situation where no-one ever receives commission, meaning that employees are more likely to struggle financially. This could lead to a demoralised workforce.

Workplace culture

Fairness, openness and good communication are strong key points for keeping employee’s morale high.

Ensure that you set reasonable, practical targets. Praise employees who proactively contribute to the targets they set rather than imposing unrealistic goals that may result in them becoming unproductive and overwhelmed. An unproductive and overwhelmed sales team hardly ever reach their targets. Therefore, this has an impact on the entire team.

Furthermore, it’s a good idea to share strong leads amongst the whole team. This gives them all an equal opportunity to achieve their commission. Saving the best leads only for senior salespeople reduces the likelihood of other team members gaining the experience needed for career progression.

It’s also essential to ensure that team members have someone they can approach if they are struggling or feel overwhelmed. This means they are more likely to seek help before they reach crisis point.

We’re here

Ben exists to provide support for life to the people of the automotive industry and their families. You can download a leaflet to print off and put on your noticeboard or leave in your staff room so colleagues are aware that we’re here to help them get back on track.

We also provide advice on financial wellbeing, including a range of downloadable booklets on topics including budgeting, debt and retirement.

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