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July 04, 2010
Adding Commissions to Salaries or Lowering Salaries to Add Commissions

In a BLR webinar entitled ‘Commission Pay Plans: How to Motivate Your Sales Staff in a Roller Coaster Economy’, David Wudyka discusses the options of adding commissions to base salaries or lowering salaries such as an hourly rate in order to attach a commission component to the base earnings of a sales representative. Which option is better for the employer? He provided the information regarding making these types of transitions for Commission Pay Plans (CPPs). In either of these cases i.e. adding a commission to the current base salary or lowering the current base salary in order to add a commission to it, or any other combination that can be considered, the employer is urged to do the following:

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  • Firstly, clearly understand the business goal
  • Secondly, the employer can calculate out the effect of using the CPP combination that have been proposed. The goal is to determine the total compensation but also all forms of pay and income that the employee may receive in the company compared to what this employee was receiving before the change in pay
  • Most importantly, determine what the business benefit is for each of the proposed commission pay plan scenarios. For example: What will the employer or organization get if the employees sell at different levels? What will the employees get? Hopefully, this is a win-win situation

David Wudyka, SPHR, MBA, BSIE, is the founder and managing principal of Westminster Associates (www.westminsterassociates.com), a Massachusetts-based human resource and compensation firm that specializes in pay, performance, and productivity issues. He brings more than 30 years of professional HR and compensation experience to the table for clients around the country. He speaks and writes frequently on HR and compensation issues, and he earned his master’s degree from Syracuse University.

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