In a BLR webinar entitled ‘Incentive Pay: Best Practices for Designing and Managing Pay-for-Performance Plans’, Dan Kleinman explains that commissions are one of the types of incentive pay found within an organization. Commissions as incentive pay is described below:
- Employees earning commissions are paid in whole or in part based on a percentage of their sales made
- One model is base pay plus commission, in which workers earn a set salary plus an incentive that’s calculated as a commission (e.g. $30,000 base plus 5 percent of gross sales)
- Another model is straight commission, in which workers are paid solely with commissions on sales
- In both situations, the incentives typically increase as workers grow their sales volumes
Dan Kleinman is the principal of Dan Kleinman Consulting, a California-based compensation and human resource consulting firm. For the past 18 years, he has served as an independent consultant for a broad spectrum of regional, national, and international companies, providing compensation, performance, organizational planning, and reward-system design services. He can be reached at email@example.com.