Advantages of a Commission-Based Compensation

Advantages of a Commission-Based Compensation

By Dlx Admin | Business | 0 Comments

You’ve probably heard of a commission-based incentive for employees of certain companies. Some may find it ineffective; but, some have had a huge success because of this program. There are a lot of compensation plans to consider, that’s why it can be difficult when starting out with this system.

One of the drawbacks of paying salaries is that employees may feel complacent and comfortable, which eliminates the need for them to perform better than what is expected of them. Hiring highly experienced salespeople with great performances from previous companies are also going to be a huge advantage for your company. Salespeople like this know how to control the game and are hungry for more sales, even if they’ve already met the desired quota of the company.

There are a lot of compensation systems to consider. Some companies may choose from commission-based only or a salary-plus-commission compensation for their employees. We have compiled some of the advantages of commission-based compensation to help you decide which compensation program is best for you and your employees.

Increased Sales

Some employees take salaries for granted; but, when they are given commissions, they feel more motivated in doing work, as the more sales they get, the higher the pay they receive. Another benefit it offers is both the employees and employers benefit from having this kind of system. If employees are motivated to do more work, it means that the company also receives more sales in return.

Commission Cost Is Tied to Your Income

Financially, this would be advantageous to companies, as you only pay what you get in return. Many companies choose the commission-based-only incentive because this means that you only incur commission costs when you’ve made sales and revenue.


Some employees enjoy the freedom they get when they are not required to report to their office or attend random meetings. It saves them time, money and effort, which they can use for acquiring sales.

Better Employees

Companies who offer commission-based salaries get to have the best employees. As an owner or a team leader, you can pinpoint who delivers their job not only well, but also with flying colors. With this strategy, you can save money and time when you let go of low performers in your company.

While this may be a great system for both the employees and the company, some employees may prefer a more flexible and safe compensation for them. Others find it risky, especially when companies do not support their employees well. For this to work with both the employee and employer, the company must also launch marketing efforts. The company should also provide printing and advertising costs for flyers, brochures and other needed materials so both parties can benefit.

Before finally deciding if you’re company is ready for this new compensation system, review your business goals first. Compensating people can get really tricky; but, if you think this new strategy aligns with your company’s objectives, then you may consider it.

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