Sales Commission - how to structure?
Discussion
Just looking for some ideas....
I want to add some form of commission to our team of account managers.
Baring in mind that they currently have a fixed salary only I don’t want to give away too much however do want it to be fairly appealing also.
I was thinking about setting targets and then giving a fixed sum for hitting target (say £100) then a percentage of the profit that they bring in over that target.
Do people pay on turnover normally or profit?
How do you or your company work out your / their commission structure?
I want to add some form of commission to our team of account managers.
Baring in mind that they currently have a fixed salary only I don’t want to give away too much however do want it to be fairly appealing also.
I was thinking about setting targets and then giving a fixed sum for hitting target (say £100) then a percentage of the profit that they bring in over that target.
Do people pay on turnover normally or profit?
How do you or your company work out your / their commission structure?
I run a sales team of over 100 people. They are all on sales plan.
They are paid a basic salary then their commission is based upon the following
40% on contract value signings
30% on GP from said contracts (plus backlog)
20% on Revenue as above
10% individual challenges set by the managers
Above 100% they get x2 kickers on all elements, uncapped.
Bit complicated maybe but works well, very happy to provide more details if interested...
HTH
They are paid a basic salary then their commission is based upon the following
40% on contract value signings
30% on GP from said contracts (plus backlog)
20% on Revenue as above
10% individual challenges set by the managers
Above 100% they get x2 kickers on all elements, uncapped.
Bit complicated maybe but works well, very happy to provide more details if interested...
HTH
New Business Account Managers or normal Account Managers?
I'm an Account Manager (Farmer), my commission is paid quarterly based on the size of the accounts i'm looking after and their age.
For example for new business deals the contracted value in Year 1 counts towards my targets but is excluded from my commission payments.
Eg. Hit 100k target for the quarter, paid 2% commission = £2,000, if 20k of that target is new business that's excluded from my target and i'd be paid 2% of 80k.
I then get different thresholds 100%, 125% where the % paid on commission changes.
The only other thing that is taken out is any supplier costs incurred.
I'm an Account Manager (Farmer), my commission is paid quarterly based on the size of the accounts i'm looking after and their age.
For example for new business deals the contracted value in Year 1 counts towards my targets but is excluded from my commission payments.
Eg. Hit 100k target for the quarter, paid 2% commission = £2,000, if 20k of that target is new business that's excluded from my target and i'd be paid 2% of 80k.
I then get different thresholds 100%, 125% where the % paid on commission changes.
The only other thing that is taken out is any supplier costs incurred.
There are as many ways to structure a payplan as you an imagine.
Your starting point is to identify what you actually want to incentivise, say turnover, profit, retention, timely/accurate reports etc.
Then decide how much you want to pay for each element, and whether you want to cap it at 100%, 150% or whatever or let them earn as much as they can, or as stated above introduce kickers for over-performance.
One thought to keep at the back of your mind is ...
... any danger of miss-selling which could do a lot of harm to customer relations/brand.
Your starting point is to identify what you actually want to incentivise, say turnover, profit, retention, timely/accurate reports etc.
Then decide how much you want to pay for each element, and whether you want to cap it at 100%, 150% or whatever or let them earn as much as they can, or as stated above introduce kickers for over-performance.
One thought to keep at the back of your mind is ...
... any danger of miss-selling which could do a lot of harm to customer relations/brand.
Thanks all, some interesting points there.
I must say the main reason that we did not offer commission was that we didn’t want people pushing and hard selling.
With the team we have now, I don’t think that we will have that problem though which is good.
With the figures quoted above I guess (where turnover is mentioned) that the margins are very high as the percentages seem huge! I was just looking at 2.5% or 5% max really.
We sell low value items and the margins are very tight as it is.
The current pay packets start at 12k pa to around 20k pa for telesales account manager.
Now this might sound like a silly question but do you wait for people to start paying for themselves before doing this or start ASAP?
I want to keep things simple so everyone understands and not so many queries / mix ups.
Am thinking £100 for hitting target and 5% over that on the profits. That would see someone who hits 125% getting about £150-200 per month.
Lastly, as things are moving quite quickly how often do people review the targets – I would like to do monthly but some people saying that quarterly is better?
I must say the main reason that we did not offer commission was that we didn’t want people pushing and hard selling.
With the team we have now, I don’t think that we will have that problem though which is good.
With the figures quoted above I guess (where turnover is mentioned) that the margins are very high as the percentages seem huge! I was just looking at 2.5% or 5% max really.
We sell low value items and the margins are very tight as it is.
The current pay packets start at 12k pa to around 20k pa for telesales account manager.
Now this might sound like a silly question but do you wait for people to start paying for themselves before doing this or start ASAP?
I want to keep things simple so everyone understands and not so many queries / mix ups.
Am thinking £100 for hitting target and 5% over that on the profits. That would see someone who hits 125% getting about £150-200 per month.
Lastly, as things are moving quite quickly how often do people review the targets – I would like to do monthly but some people saying that quarterly is better?
samrr said:
With the figures quoted above I guess (where turnover is mentioned) that the margins are very high as the percentages seem huge! I was just looking at 2.5% or 5% max really.
I'm guessing you have misunderstood Ziggy's percentages - these don't refer to 40% of turnover, but refer to 40% of the total potential bonus is based on a turnover element in the payplan.samrr said:
Now this might sound like a silly question but do you wait for people to start paying for themselves before doing this or start ASAP?
I'd introduce it for all sales people from day one. If they don't sell, it doesn't cost you any more as you won't be paying bonus when they aren't hitting objectives, and there is a danger that they could underperform during an initial period so they get easier targets when the bonuses are to kick in. That's why YOU need to decide what you want to incentivise and pay for. Also, having a bonus available gives them an incentive to work hard from the outset.samrr said:
I want to keep things simple so everyone understands and not so many queries / mix ups.
Lastly, as things are moving quite quickly how often do people review the targets – I would like to do monthly but some people saying that quarterly is better?
A payplan that changes too often is hard to understand (for both sides) and doesn't encourage long-term positive performance so the basic plan should be fairly steady but you can add short-term incentives for a particular product line or objective. Lastly, as things are moving quite quickly how often do people review the targets – I would like to do monthly but some people saying that quarterly is better?
Having had personal experience of a payplan that needed maths, langauges and philosophy degrees to figure out where/how to earn money, and then discovering hidden clawback arrangements that weren't actually documented anywhere, a bad plan is worse than none at all!
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