Sales Compensation

Things to Consider When Compensating Sales People

Before you roll out a sales compensation plan, you'll want to make sure you've thought through these important sales compensation plan considerations.

Your sales team is different than every other department in your company.

Great sales reps are hard to come by, so the management of your sales force requires careful handling, especially when it comes to the issue of compensating sales people.

The development of a sales force compensation plan requires business owners to perform a delicate balancing act. On the one hand, you want to incentivize your team to perform at the highest possible level. But at the same time, you can't afford to let incentives dry up the cash resources you need to grow the business.

Further complications arise when you consider the implications of legislation that targets fair and equitable compensation in the workplace. The bottom line is that you're going to have put some thought into the way you pay your sales team - starting with our list of things to consider when compensating sales people.

• Base-plus-commission. A base-plus-commission compensation structure has the potential to give your sales force a combination of incentives and income stability. If your sales team is required to perform customer service, a combined approach to compensation can also help maintain an adequate focus on your customer support.
• Equal Pay Act. The Equal Pay Act (EPA) prohibits employers from practicing wage discrimination on the basis of gender. This can be problematic in a sales environment where employees are compensated differently. To avoid legal problems, document your compensation plan in a written policy.
• Closed pay vs. open pay. As long as you aren't engaging in discriminatory compensation, there is no reason why sales people need to know their peers' compensation levels. However, an open pay policy can minimize the amount of drama and politics in your sales division, especially when sales compensation is tied directly to performance.
• Modification clauses. Your Employment Agreement and Employee Handbook should contain a modification clause. This clause stipulates that the employer is free to change the sales compensation plan at any time, based on changing conditions in the marketplace or the company's financial position.
• Year-end bonuses. If you aren't sure how much to compensate your sales team or if you are concerned that commissions could jeopardize company goals, consider offering year-end sales bonuses that tie sales compensation to the company's overall financial performance.

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