3 weeks ago
June 26, 2024

Are You Getting Paid Fairly As A Salesperson? 5 Compensation Types & 6 Things To Watch Out For

There’s no doubt money is an essential consideration when looking for a sales job. You want to make a fair wage based on your experience, performance, and years of service….

Jace Ermidis Toronto Sales Recruiter
Jace Ermidis

There’s no doubt money is an essential consideration when looking for a sales job. You want to make a fair wage based on your experience, performance, and years of service. The unique thing about sales is there are a lot of different ways you can be paid. Many jobs are not based on an hourly wage or annual salary. So, it can be more challenging than other industries to know if you are getting paid fairly. 

As a busy veteran sales recruiter, I commonly have conversations with sales professionals about this topic. Some companies offer other incentives, perks, and bonuses as a means to sweeten the pot but not necessarily boost the actual amount of money you take home. 

To measure if you are getting paid fairly, I’ve spoken with my sales recruitment colleagues at SalesForce Search to devise a list of the 5 ways you could get paid. Then we’ll outline 6 compensation options to scrutinize. Sound good?

What are the ways salespeople get paid?

Here’s a list of the many ways you could be paid for sales roles. Keep in mind, that some jobs may have compensation structure that combines two or more payment methods.

1. Fixed Base Salary

A guaranteed, regular payment that provides financial stability regardless of sales performance. This is often combined with other forms of compensation.

2. Commission-Based

Commission payments can be paid out in several ways. The most common are:

  • Straight Commission: Salespeople earn a percentage of the sales they generate, with no fixed base salary. This method directly ties earnings to performance.
  • Salary Plus Commission: A combination of a base salary and commission. This provides stability with the potential for higher earnings based on sales success.
  • Tiered Commission: Commissions increase as salespeople reach higher sales targets or thresholds. This incentivizes higher performance by offering progressively larger rewards.
  • Residual Commission: Salespeople earn ongoing commissions for as long as their clients continue to make purchases, often used in subscription-based businesses.

Everything thing in life is a sale and everything you want is a commission

3. Bonuses and Incentives

Many sales companies offer bonuses or incentive payments to boost performance. The most common structures are:

  • Performance Bonuses: Additional payments for reaching specific targets or milestones, such as quarterly or annual sales goals.
  • Sales Contests: Temporary competitions that reward top performers with cash prizes, trips, or other incentives.
  • Team Bonuses: Incentives based on the performance of a sales team, encouraging collaboration and collective success.

4. Profit Sharing

Salespeople receive a share of the company’s profits, aligning their interests with the overall success of the business.

5. Stock Options and Equity

Salespeople are given the option to buy company stock at a discounted rate, providing potential long-term financial benefits tied to the company’s growth. Or salespeople receive ownership stakes in the company, often used as a retention tool and to align employee interests with company performance.

By understanding these payment methods, sales professionals can better assess if their compensation package fairly reflects their skills, experience and abilities. Now that you see the options available to you, let’s take a look at common compensation red flags to watch out for. 

What compensation options should salespeople watch out for? 

Everyone wants a fair shake to maximize their compensation potential. It’s a reason why many people get into sales in the first place. Here are some signs you may not be getting paid as fairly as you should:

1. Inconsistent or Unreliable Pay Structures

Frequently changing commission rates can create uncertainty and frustration among salespeople. It also makes it difficult for you to plan your finances. 

Delayed payments are also another red flag. Long delays in paying commissions can cause financial stress 

2. Low Base Salary with High Expectations

Receiving a minimal base salary without sufficient commission opportunities can lead to financial instability, especially if sales targets are unrealistic or market conditions are challenging.

3. Unattainable Sales Targets

Employers that set sales targets that are nearly impossible to achieve can demotivate salespeople, leading to disengagement and high turnover. Placing excessive pressure on salespeople to meet high targets without providing adequate training, resources, or support can result in burnout and job dissatisfaction.

4. Lack of Transparency In How Commission Works

This is a tactic used by some companies to try to cap salespeople’s earnings. It can happen it two main ways:

  • Unclear Commission Structures: Complicated or unclear commission structures can cause confusion and mistrust. Salespeople need to understand exactly how their pay is calculated.
  • Hidden Clauses: Including hidden clauses that reduce or negate commission payments, such as clawbacks for returns or cancellations, can be seen as unfair and deceptive.

5. One-Size-Fits-All Compensation

Watch out for companies that don’t adjust their compensation packages based on experience and role. Using a uniform pay structure that doesn’t account for differences in territories, industries, or individual performance can be unfair and ineffective. Not considering experience or skill levels in the pay structure can lead to dissatisfaction among seasoned sales professionals.

6. Poorly Designed Bonuses and Incentives

Finally, look out for companies without clearly laid out bonuses and incentives. Watch out for:

  • Arbitrary or Unfair Bonus Criteria: Bonuses based on criteria that seem arbitrary or are perceived as unfair can demotivate employees and foster resentment.
  • Group Bonuses Without Individual Accountability: Relying solely on group bonuses without recognizing individual contributions can lead to free-riding and reduce individual effort.

A Final Word From Our Recruiters On Compensation In Sales

It’s important for sales talent to always review their standing in the sales industry. Know the ways you can be paid and know your worth to ensure you are being compensated fairly. 

More Compensation Advice From Our Sales Recruiters

Looking for a Pay Raise? Why You May Need to Switch Sales Jobs to Get It

Know Your Value: How Sales Recruiters Can Help You Ask For The Right Salary

3 Actions to Take to Avoid a Counteroffer Situation With Sales Talent

Jace Ermidis Toronto Sales Recruiter

Jace Ermidis

Jace is a sales recruiter with almost a decade of experience building high-performing sales teams in North America, across Europe, Asia, and Australia. He also has plenty of tips to help your sales team increase revenue!