The commission is an integral part of any sales department in an organisation. As the sales department is paramount to the success of a company, the commission is vital to the life of the sales department. Therefore, sales commission schemes determine how well the department will perform.

Here are the qualities of the most effective sales commission schemes.

The commission agreement

The sales commission agreement identifies how to compensate salespeople for their services. It highlights the terms of employment for sales personnel as well as the association between the employer and employee. The sales commission agreement is an essential aspect of a sales commission scheme because it allows the employee to know what they are signing up for, in advance. It lists the commission, duties, and other compensation the staff member should expect after the job.

The commission structure

This aspect of a sales commission scheme points out the amount of money a company is capable of paying its sales team. The sales structure and the performance of an organisation determine how it will compensate its sales workforce. Sometimes it may be suitable to offer commissions as the primary compensation for the salespeople, while at other times a basic salary combined with a commission will do better.

An effective structure

An effective commission structure motivates the sales team and ensures that each salesperson is compensated fairly for their effort.

Such a structure:

  • Avoids capping commissions or setting limits to how much salespeople can make
  • Is simple, straightforward, and not structured to take advantage of the salespeople
  • Is designed for optimum understanding

The sales manager

Sales commission schemes are only as effective as the individual behind them. Different commission schemes are available, each with its own merits and demerits. They include any of the following; a salary-plus-commission scheme, commission-only scheme, gross-margin-commission scheme, tiered-commission scheme, commission-draw scheme, or base-rate-only scheme.

The sales manager should be familiar with as many of them as possible to determine the one that best suits his or her company, or in order to sell a particular product.

It is vital that a company be careful when selecting a sales manager since he or she plays a fundamental role in determining the company’s future through its sales team.

The bottom line is that well-thought-out and executed sales commission schemes are the difference between success and failure in companies. Effective commission schemes incorporate a good commission agreement, a thorough and strategic commission structure, and have a professional sales manager behind them.