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July 03, 2010
Capping Commissions for Your Sales Force

David Wudyka discusses Commission Pay Plans (CPPs) in a BLR webinar entitled ‘Commission Pay Plans: How to Motivate Your Sales Staff in a Roller Coaster Economy’. He states that some organizations may decide to place a cap on the commissions that the sales force can get and provides the following information regarding this situation:

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  • This is a common dilemma that employers can face
  • If a large sale occurs, the sales representation can get a windfall of commission dollars. This can be a lot of money
  • The issue with this is that some people may enquire regarding the amount of work the sales representative actually did to generate or earn that level of commissions
  • A huge commission can also imply that the sales representative will then be making more money than some executives within the company up to and including the CEO
  • This can also be an issue for some parties. However, other parties, including the CEO could look at the sale as a good thing for the company
  • If sales representatives are capping out too early, then it may also be a problem for the organization

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 speaks and writes frequently on HR and compensation issues, and he earned his master’s degree from Syracuse University.

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