Employees with a job in sales make a base salary and often a sales commission for meeting or exceeding particular sales targets. A sales commission is an additional compensation the employee receives for meeting and exceeding the minimum sales threshold.
Employers pay employees a sales commission to incentivize the employees to produce more sales and to reward and recognize people who perform most productively. The sales commission has proven to be an effective way to compensate salespeople and to promote more sales of the product or the service. This is why the use of a sales commission is widespread in some organizations.
The sales commission is effective for individual performers because it provides employees with the opportunity to obtain additional compensation that rewards their efforts, and especially, their achievements. Many people find this recognition is rewarding and gratifying both personally and professionally.
Employers must design an effective sales compensation plan that rewards the behaviors that the organization needs to promote. For example, if your inside sales team works with the same customers and any salesperson can take a call or respond to a customer’s request for a quote, you will not want to pay a sales commission based on individual performance. You will instead want to share the sales incentive equally across members of the sales team, to encourage teamwork. People who work in a shared commission environment tend to help each other out regularly. An individual sales commission in this teamwork environment would cause disharmony and place emphasis on the wrong selling behaviors.