What is Commission?
Commission work pays employees based on the number of products or services they sell in a given time period. Commission pay is designed to motivate employees and reward outstanding performance especially in marketing and sales.
Definition
Commission pay can make up an employee’s whole wage or be paid as an extra incentive on top of their base wage or salary. How often an employee is paid commission depends on the terms of their employment agreement and the relevant Modern Award.
An employee can only be paid exclusively on commission when an Award, Enterprise Agreement or other registered agreement states the employee can be paid this way. For information on commission-only payments, refer to the relevant award to understand how this type of payment works for employees.
In some commission work (insurance for example) it’s common for salespeople to earn a residual commission (an ongoing series of payments) from clients who stay with the company and make repeat purchases. This is a powerful incentive for employees to stay with the company and saves money on recruitment costs.
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Sales Commission
A sales based commission is an individual negotiation between the employee and the employer. As such, unless prescribed by an Award or Agreement, the parties can negotiate terms on a contractual basis with no minimum or maximum payment structure. Nevertheless, it is important to remember a sales based commission should be sufficient enough to motivate employees and help retain top salespeople whilst remaining in the business’ best financial interests.
Should an employee be engaged on a commission-only basis that is permitted by an Award/agreement, it is important to ensure any sales commission agreement satisfies that Award/agreement.
Types of Commission Based Jobs
Almost every business needs people who can convincingly sell products and services. From cosmetics to new cars and telecommunication, the demand for experienced and enthusiastic salespeople is ongoing.
Commission based jobs vary based on the industry and role of the salesperson. Some businesses sell directly to consumers, while others sell to other businesses. These jobs can involve selling face-to-face, cold-calling over the phone, or making sales presentations to high-profile corporate clients.
Benefits of Commission Work
Employees who are motivated and driven to succeed can reap many benefits from a commission based job. The biggest advantage for an employee on a commission arrangement is being in control of how much you can earn. Whether they already have a base wage or salary, the desire to earn more is a powerful motivator.
For employers, it’s easier to monitor the performance of top salespeople and those who are underperforming. Highly motivated salespeople can greatly increase profits for the company and develop long-term relationships with clients who provide repeat business. A tailored and well-drafted commission agreement ensures the employee will only receive the financial benefit subject to high performance. This structure will assist in eliminating the burden of having to overpay less capable employees.
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