Establishing bonus and commission schemes for sales staff

Sales staff can play a key part in the success of a business. Motivating and retaining the best of them is vital. So what factors do you need to consider when setting up a reward scheme for your sales team?

Money as a motivator

Money is a key motivator for many employees and, as a result, most reward schemes for sales staff are based around the payment of bonuses or commission on top of basic salary. Tax and NI will be payable on all of these but how they are weighted will depend on the type and size of business.

Paying a smaller salary in lieu of a larger bonus or commission will mean there is a greater focus on achieving targets and will reduce the pressure on salaries. But it’s important that the salesperson does not feel completely demotivated if a sale does not happen. Too much of a reliance on commission or bonus can also result in poorer customer satisfaction, as salespeople go after their reward with less regard for building good relationships with customers.

Bonus or commission?

Let’s look at the difference in how bonuses and commission are structured. A bonus is usually paid when a particular target is achieved. This could be linked to a single objective, or multiple business objectives – around revenue, profits or productivity, for example. In larger organisations, a bonus scheme can relate to local targets and/or be linked to overall company performance. A bonus scheme can also be used for retaining staff – you agree to pay a bonus after a certain period of time if targets are met, for example. 

Commission involves paying a percentage of what the contract won is worth. As a result, there is a clear link between the amount of business the employee brings in and the amount of financial reward. However, if lots of employees are involved in the sales process it may be difficult to correctly allocate the commission. You must be clear about which areas of the business are involved.

Individual or team?

One factor to consider is whether bonuses should be based on individual or team performance. Will everyone get a chance to work towards the target, or will the bonus be awarded to the highest performer? On the face of it, team targets may help to bring staff together in pursuit of a common goal. All employees can potentially benefit from the company’s success, but drawing up a reward scheme which is fair to all can be difficult. If business is lost by a lack of after-sales support, will the salesperson that originally brought in the business be affected? Additionally, high-achieving sales staff may resent ‘carrying’ less successful colleagues if they are bringing in a disproportionate amount of business.

Reviewing progress

You will also need to decide how often progress towards the bonus or commission will be reviewed and how your sales data will be analysed to establish whether they can be awarded. You should review any reward systems you put in place regularly to check they are still having the desired results, both for the employee and the business.

It may also be helpful to look at offering other benefits, as bonuses and commission may not be the best way of motivating all staff. Both bonuses and commission can be affected by external factors such as an economic downturn and, ultimately, any reward scheme you put in place needs to finance itself.

If you are looking to implement this kind of scheme and need advice, Arram Berlyn Gardner can help.  Call us on 020 7330 0000 or email abglondon@abggroup.co.uk for further information.

 

Paul Berlyn

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s