How Do You Structure Employee-Based Commission Sales?


Quick Answer

To structure employee-based commission sales, create a compensation plan for all employees, ensure it complies with all federal and state laws and establishes the parameters for employees who want to increase their income. An employee-based commission sales strategy compensates employees based on the products or services sold rather than on salary or hourly wages.

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Full Answer

Most companies offer a base salary as well as commission opportunities to employees. This increases employee satisfaction as well as performance.

  1. Establish a compensation plan
  2. Determine how employees will be compensated for their efforts. Some employers pay only commissions, only salaries or a combination of both. Other forms of compensation might include stock options, health benefits, vacation pay or bonuses.
  3. Verify that the compensation plan falls within federal and state law
  4. Federal wage and hour laws require employers to compensate all employees based on the minimum wage in their state. However, these laws do not apply to outside sales professionals who perform their job duties away from the company's base of operations, according to the United States Department of Labor. Consult an attorney to ensure that no aspect of the compensation plan violates the law.
  5. Define strategies to increase pay or benefits
  6. Employee-based commission sales strategies are most effective when employees can increase their earnings through hard work and greater effort. For example, a variable commission rate changes based on employee performance, according to the American Marketing Association.
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