A sales compensation plan should benefit you as well as the business you work for and should be flexible enough to reward you for great performance.
Your sales compensation plan is one of the most important agreements you have with your employer, so it’s natural to wonder whether your sales compensation plan is paying you what you’re worth. Unfortunately, there are no rules for determining whether sales compensation is fair. Even top sales reps sometimes fall into the trap of overestimating the business they bring in and underestimating what they cost the company in terms of benefits, training, and other expenses. However, asking yourself the following questions should help determine whether your sales compensation plan is adequately rewarding you for your hard work.
With today’s technology, mistakes on your sales compensation plan should be few and far between. To make sure that mistakes are avoided, you should have a sales compensation plan in writing. Additionally, the compensation mix for each paycheck you receive should be thoroughly documented so that there is no question on whether the sales compensation plan is being followed. If there are regular disagreements over what you’ve earned, your sales compensation plan might not be paying you what you’re worth.
Cultivating new business takes a lot of effort; after all, you are starting from square one with every new prospect you contact. If you regularly bring in new business based on your prospecting efforts, you are expanding your employer’s market, and should be adequately compensated for the additional effort this type of business generation takes. A fair sales compensation plan should take this into account and build in a structure that allows for higher compensation on new business.
The best sales compensation plans allow all sales representatives to start on an equal basis and earn commissions and bonuses based on performance. However, some organizations have legacy sales compensation plans in place, meaning that newer hires are treated differently than sales representatives who have been with the company. While eligibility for certain perks such as club allowances and profit-sharing can reasonably be made contingent on sales rep longevity, a compensation plan that pays differently for the same performance on basic sales goals encourages bad feelings – and many would agree, rightfully so.
Caps on sales compensation plans can be onerous, especially when you reach or even exceed the compensation level allotted under a cap. This is understandably de-motivating, and for many it heralds a career change. However, smaller companies and those that are just starting out might not be able to afford an uncapped compensation plan. If cap is an issue for you, consider negotiating to have it removed or to receive other compensation – especially if the compensation you would have earned otherwise regularly exceeds the limit set by the cap.
In the final analysis, the best way to tell whether or not your sales compensation plan is fair and is paying you what you are really worth is to compare what your compensation plan is paying against the average for your industry. Searching job listings for competitor companies and discussing compensation at past employers with your peers are the most discreet ways to make a comparison.
A strong sales compensation plan should benefit you as well as the business for which you work, and should be flexible enough to reward you for exceptional performance. If after benchmarking your pay to your peers, standard compensation mixes, and averages for your industry you still don’t believe that you’re making what you are worth, you have two options: Discuss your concerns with management and negotiate for a better package, or seek out a new position. Taking action is the only way to avoid negative feelings and potential long-term damage to your career from an unfair sales compensation plan.
Rhys is a tenacious, top performing Senior Sales Recruiter with 11+ years of focused experience in the Digital Media, Mobile, Software, Technology and B2B verticals. He has a successful track record of headhunting top performing sales candidates for some of the most exciting brands in North America. He is a Certified Recruitment Specialist (CRS) and has expert experience in prospecting new business, client retention/renewals and managing top performing sales and recruitment teams. Rhys enjoys spending quality time with his wife, son, and two daughters, BBQing on a hot summer day, tropical vacations and cottaging.