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10 Tips for Devising Commission Schemes
- Commission should be easy to calculate for all parties. The best schemes are when the salesperson can calculate in their head how much the sale is worth in their own 'back pocket'.
- Commission should incentivise and motivate – so many schemes are so difficult to calculate that the bonus earned becomes a 'nice to have' rather than being a driver to achieve more.
- Commission should only be earned on 'good business', i.e. Not loss leaders or 'introductory deals'.
- Commission should only be paid when the costs of the salesperson (and the cost of sale) are covered.
- Commission should be uncapped to drive further sales - the more the salesperson earns, the more revenue is generated, so everyone is a winner.
- There should be a mechanism to stop 'loading up' (holding back sales) for the next sale period.
- Commission should be modelled thoroughly before releasing to the team.
- The commission scheme should be a side letter to the contract so that it can be amended without having to amend the entire contract.
- You must add the following, or similar line, "The Directors reserve 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 upon giving one months' notice." (This is common in virtually every sales commission scheme contract).
- The commission scheme should be signed by the employer and the employee so that it is fully understood by all parties and discrepancies cannot be challenged in the future.
Further information can be found here: https://www.aaronwallis.co.uk/employers/advice/managing-sales-teams/how-to-devise-a-sales-commission-scheme/
Read More about Devising Sales Bonus Schemes
The Most Common Sales Commission Schemes
Golden Rules in Setting Sales Commission Schemes
10 Top Tips for Devising Sales Commission Schemes
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Date published: 26th February 2024
by Darren Dewrance
Founding Director
About the author
Darren Dewrance
Darren spent six years in sales and field sales before joining the original sales recruitment specialist, Austin Benn, in 1998. After achieving the status of top consultant, out of about seventy at the time, Darren rose from Senior Consultant to Operations Manager of the commercial sector before leaving to join a London based Headhunter in 2003 before setting up Aaron Wallis with Rob in October 2007.
With a natural leadership style, Darren is an expert on putting his finger right on the heart of the problem. His natural commercial instincts have helped hundreds of employers make better recruitment decisions. Darren is married with two children, and when not at work or with his family, he likes nothing more than to be on the side of a river or a lake with a rod in his hand.
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