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Golden Rules When Setting Commission Schemes
When introducing any new bonus or commission scheme, it is imperative that you insert the following, or similar, line into the commission scheme and the employee contract:
"The Company reserves the right at any time, in its absolute discretion, to vary the amount of commission payable and/or to vary the terms of the commission arrangements and/or to withdraw the commission arrangements in their entirety on giving you (number) weeks/months' notice".
I have known several companies get into complicated situations by not having this clause, which is pretty standard in any sales contract.
It's Not All About Money... Money, money
It is vital to retain your best sales talent. There is no denying that financial rewards aren't important for most sales professionals; however, it is not the only thing that is going to motivate your sales team. If commercial realities and sales are down, financial rewards are likely to be down. Therefore, it's time for you to get more creative. You can do tons of things for little or no money. Things like a personalised letter sent to your employee's home address or a well-chosen book with a personal inscription congratulating them on their recent 'big win' can be very powerful. You can read our blog post to learn more about motivating your salespeople!
Every Little Helps
Remember your work colleagues have a life outside of work too! They might enjoy spending their time watching a game of football, catching the latest superhero flick or just treating themselves and their family to a good meal. If you know what your employees like to get up to in their spare time, you will be able to create and provide smaller rewards that may not have a high financial value but show that you genuinely appreciate them. Providing these rewards helps increase motivation, team morale and ultimately productivity and sales.
When The Going Gets Tough
It's a pleasure to focus on numbers and numbers when things are going well. Though when times are tough, it is important to pay attention to individual performance and the specific KPI's to understand where things could be done better along the chain of the sales process to help improve and hone your sales team's skills.
You can then incentivise your team members to each design a training course on the element of the sales process that you want to improve and reward accordingly based upon the positive impact that this training delivers (either as individuals or as a team). If a sales professional is struggling with a particular aspect of the sales process, then get them to design a training course for your team in this specific area. At a subconscious level, this will significantly help them to improve their skills in this area and ultimately increase motivation - and output.
Tell The World... Or Just The Team Will Do
Many employees may feel that their hard work and hard-earned cash for the company goes unmissed by their managers and by other work colleagues. In several surveys (including the State of Sales in the UK), recognition and respect for the job they do are cited as the most important thing that sales professionals seek. Salespeople love public recognition and would thoroughly enjoy having a lunch in their honour, a poster in the employee newsletter or even just a thank you by the sales manager during a team meeting. Little cost but maximum impact!
A reminder of the Rules when Setting a Sales Commission Scheme
- Define the commission rate: Set the commission rate based on your sales goals and the effort required to achieve them.
- Set clear expectations: Make sure your sales team understand the commission rate and what it requires of them.
- Make sure it is fair: Make sure the commission rate is fair and reasonable for all of the sales team - the more commission they earn, the greater their sales numbers!
- Keep it simple: Keep the commission structure simple and easy to understand. Complicated commission schemes do not motivate.
- Review regularly and adjust if needed: Review the commission rate regularly to ensure it is still competitive and appropriate. Get a senior member of the non-sales team also to review and offer their opinion; Finance Directors are usually good at this!
- Document everything: Document the commission rate, goals, and expectations to ensure everyone is on the same page.
To Conclude
Any sales employer will come face-to-face with difficult times or complex moral or staffing issues at one point or another. Therefore, it is imperative to focus on the right things and the correct incentives so you can get the best out of your staff.
Commission schemes are important, but there isn't one scheme that should be used over another. It can hugely depend on the nature of your business and the industry you work within. However, never underestimate the power of simpler methods of gratitude for hard work, such as personally handwritten thank you notes, a bottle of Merlot or an all-expenses-paid dinner for your employee and their family.
For Further Reading, see the following article on Performance Related Pay - Creating a Link Between Pay and an Employee's Performance
Read More about Devising Sales Bonus Schemes
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Date published: 26th February 2025
by Darren Dewrance
Founding Director
About the author
Rob Scott
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