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November 28, 2024
If you're looking to develop your salesforce, you might have asked yourself, 'Should I hire salaried or commission-only sales representatives?’ In this blog post, we'll explore the relative advantages and disadvantages of commission-only and salaried sales reps so you can make an informed decision.
Firstly, if you're a startup or SME, you might not have the resources for salary-based sales representatives. Nonetheless, you can build an equally stellar salesforce by working with a commission-only sales model - so long as your compensation structure is competitive, which we’ll get into later. Let's break it down.
A commission-only sales rep is paid strictly based upon their performance. They only get paid when they make sales. In turn, this motivates them to make the most and the highest-value sales possible. Commission-only sales representatives usually do not receive the same benefits as salaried reps, such as healthcare and paid time off (PTO) - but in unique cases, or in situations where you operate within a highly competitive area, offering these extra benefits can go a long way in making your offer competitive.
Since commission only sales reps are only paid when they sell, this saves companies on payroll expenses and relieves much of the burden on your HR department.
A clear disadvantage of the commission-only sales model is that it results in significantly higher turnover rate within your role. In some situations, top talent may have the exact experience you’re looking for - but due to personal commitments, family, etc, they are unable to commit on a commission-only basis. In situations like this, it’s beneficial to offer a draw or ‘training pay’ on a case-by-case basis while new reps are still finding their bearings.
Across 100s of client companies, the average draw that we’ve seen for a commission-based sales position is $500 per week. This keeps the candidate hungry and offers a minimum floor while they learn the sale.
An average commission-only sales representative will expect to earn between $1200 - $1500 per week. If they’re a true top performer, your compensation structure should enable that individual to earn $1800 - $2500 or more on a weekly basis. This puts them on track to break 6-figures, which makes the offer itself all the more attractive to ideal candidates.
It is notoriously difficult to hire and retain commission-only sales reps, but working with a sales recruiting agency like HyperHired will drastically increase your chances of finding and keeping the right candidates. We take a consultative approach with every client, and provide you with the top compensation structures and best practices you need in order to keep the reps you bring on.
Depending on your industry and the product or service being sold, a base + commission sales representative might be what you’re looking for. You might consider assigning salary-based sales positions when your sales cycle is long, meaning it takes an average rep 3+ months in order to be paid commission, or when you require a specific level of expertise or past experience for the role.
In the above cases, the commission-only structure can sometimes fall short unless you have other incentive models in place. For example, if your goal is to build long-term customer relationships, or the per-sale commission is not up to par with candidate’s expected earnings, then a salary role with lower upside may be a better fit.
The main drawback of the salary-based sales model is that it can become expensive, particularly if you are offering additional benefits or if you are not following the “hire fast, fire fast” ethos. Some of the additional expenses with a salary-based sales role are things like healthcare, PTO, pension, professional development and other benefits. A salaried role can be particularly costly if the sales representative is underperforming and lacks direct supervision.
However, there are other ways to motivate salaried sales representatives, including spiffs (i.e an extra bonus for 3 deals in a week or an above KPI closing rate), performance-based promotions or gifts, pay raises or bonuses, or paid time off. Typically, it's also easier to recruit salary-based sales as people are attracted to the security offered by salaried positions.
With that said, there is a distinctive difference between the type of candidate who will accept a commission-only sales role - and the type of candidate who will only settle for salary.
In summary, there's no 'right' sales model between salaried and commission-only. However, if your ultimate goal is to minimize costs, an important consideration is recruitment. If you’re working with a subpar internal or external recruiter, hiring sales reps can become expensive. Enter HyperHired.
Whether you want to hire commission-only sales reps or salaried sales reps (or perhaps you're unsure), HyperHired can help. We've helped our clients hire and retain top talent quickly. Here are a few notable examples of our successes:
Discover more about our client testimonials here.
Find out more about HyperHired's services by booking a complimentary consultation.
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