David Wudyka discusses timing commission payments in a BLR webinar entitled ‘Commission Pay Plans: How to Motivate Your Sales Staff in a Roller Coaster Economy’. He states that organizations can time commission payments to get the best impact within the company. This is one of the steps of revitalizing the organization’s Commission Pay Plans (CPP). The following are important points to note about timing commission payments within the organization:
- Understandably, many sales reps prefer being paid when a sale is booked or shipped, not when the customer pays for the sale
- However, you should strive to pay (at least partially) when dollars are received, so that you can avoid the risk of paying out a salesperson for a sale made to a slow-paying or non-paying customer
- You might also consider paying higher commission rates on sales with the most favorable payment terms e.g., 50 percent commission on sales with upfront payments, 40 percent on sales with net-30-day terms, and 30 percent on other sales
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.