There are many forms of alternative compensation possible when working for a company. At Beyond Wage we will try and explain different types of alternative compensation. It is important to have a good understanding of those different types of alternative compensation. Because it could help you choose which compensation package is right for you and might give you an edge on what to look for when job-seeking.
What Are Commissions
One form of alternative compensation that is very common in certain industries is commission-based compensation. Commission-based compensation is when you get a commission or a variable pay based on products or services sold. Commissions can come in several forms, it is most commonly a cash or bonus payout. A commission is paid out after the person completes a certain task.
In most cases commissions are sales, it is structured as a bonus that you will get after successfully selling a product or a service. The structure of the commission can take many different forms. It can be a pre discussed flat amount per sale or subscription sold or it can be a % based commission. Depending on the type of product or service sold it could also take the form of a perpetual commission for the length of the contract with the client.
Negotiating Commission-based Compensation
Also, make sure to know the terms and conditions of receiving a commission. For example, does the sale need to be of a certain size or dollar amount? Or is there a minimum amount of sales that you need to do before being eligible for a commission? Or if there is a maximum amount you can earn in commissions.
When starting a new job it is important to understand what you are selling or promoting. For example, if you are selling lower-value services or products you might want a flat amount of commission but if it is a potentially 6-figure contract deals you might want a % based commission. Make sure you understand the difference between them and also understand how and when you will be compensated in each case.
Make sure to do research online or ask someone you know about average commissions in a specific industry. Certain industries or positions might offer higher commissions than others but if you are not aware of those numbers you might not be able to negotiate correctly with the company. On the other hand, it might also help you understand what you can expect so you do not expect too much commission either for a specific job.
Don’t be afraid to try and negotiate a better commission rate when you are already employed. If you know you are one of the best salespeople then don’t be afraid to leverage that to try and get a better commission rate. When you are good at your job normally at some point you will receive a pay raise.
But a commission means the company only will have to pay you more if you sell more this means it’s a win-win. Because of that, it could be possible that you could get a lot higher commission increase than you would be able to get a flat fiat salary increase.
Commission Based Salary Outside of the Sales Position
Alternative compensation in the form of commission can be seen as a win-win for the employee and the company because in the end, both gain something. This is most clear in a sales or promotion business where you can link a sale to a commission. However, there are a lot of opportunities out there for companies to put in place a commission plan as part of their compensation packages.
As long as the position in question has any measurable KPIs it is possible to make a commission around that. The company would have to clearly understand the average KPIs that are normally achieved within a standard working week. After those KPIs are clear a commission could be offered based on faster or better KPIs compared to the average. This will offer potential incentivization to the employee and could offer a more well-rounded compensation package for the company.