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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