Paying your employees commission and bonuses
Commission and bonuses are payments made on top of basic wages
and salaries. Commission is generally based on the performance of
an individual or team and are commonly applied to sales people,
whereas a bonus is more likely to be linked to the performance of
your business over a certain period of time. Follow our three-step
guide to make the most of paying commissions and bonuses.
- How to pay commission and bonuses
- Keep it simple
- Different structures
How to pay commission and bonuses
Commission and bonuses can help to increase levels of loyalty
and motivation levels among your employees. Structures vary from
company to company but they are usually paid as a cash reward,
although some bonus schemes may be in the form of shares. It's a
good idea to keep the incentives flexible so they can evolve as
your business grows.
- Ensure any commission or bonus scheme structure is easy to
understand
- Keep incentives flexible so they can be changed as your
business grows
Keep it simple
Your employees need to see clearly what incentives are available
so keep commission and bonus schemes simple. This will also mean
you won't waste time negotiating payments - identify how
commissions are earned and keep the calculations as straightforward
as possible.
- Keep calculations as straightforward as possible
- Implement a staggered commission scheme, where your employees
can increase their commission or bonus depending on targets
reached
Different structures
Determine what role commissions will play as part of the overall
package you are offering. Some of the more common structures are
commission only, commission plus salary, commission plus bonus or
commission plus salary plus bonus. If you pay commission only, you
can specify that it will be x percent of a net sale, less any
discounts, or a bonus scheme could be percentage based, but you'll
need to specify whether this applies to company or individual
performance.
- Consider what structure works best for your business at the
time
- You could implement different schemes dependent on job
responsibilities
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