Straight commission sales jobs and base salary sales jobs both have unique advantages and disadvantages. Each sales payment model presents different incentives and challenges that may suit some people's talents and financial situations better than others. As such, individuals looking to enter the sales profession should consider the benefits and downsides of both models to see which form of employment will work best for them.
Commission Only Advantages
Commission only sales positions have a couple of notable advantages. First of all, straight commission arrangements generally offer higher earnings potential. Such jobs typically pay much higher commission rates than sales positions with a base salary, according to Frank Rumbauskas of EyesOnSales.com. For instance, a commission only sales gig might pay 15 per cent commission per sale, whereas a similar job with a base salary component could pay just 2 per cent in commission per sale. This means that a skilled professional in a major sales market can make a lot of money in commissions with just a few sales, often eclipsing the predetermined earnings that she would bring in with a salaried sales job. Frank Rumbauskas notes that in addition to the appeal of potentially unlimited earnings from commissions, these kinds of jobs often allow for less tax obligations than salaried positions due to the freelance independent contractor nature of the work.
Commission Only Disadvantages
Commission only sales jobs also come with some serious disadvantages. No financial guarantees exist in this payment set-up. In other words, the amount you earn each month depends entirely on how successful you are with your sales for that period. If you have a bad month and make only a few sales, you can expect a very small paycheck. Worse still, if you fail to make any sales, then you have zero income for that pay period. Straight commission jobs pose a big risk in this regard, especially for inexperienced sales reps who have yet to learn how to maximise their productivity or build a client base. On top of this, commission only sales representatives are usually treated like independent contractors rather than employees. They may not be entitled to any severance pay if they are suddenly let go, and they may also be responsible for their own business expenses, such as travel and home office expenditures.
Base Salary Advantages
Sales positions with a guaranteed base salary offer far more economic security than commission only jobs. The stability of a set amount per month ranks as a major plus. A modest sales commission percentage may also be available along with the base salary, allowing reps to earn a little extra cash after meeting their quotas. Aside from the financial stability, sales employees with a base salary frequently receive more attention from their employers. Companies with salaried employees have a vested interest in retaining their sales representatives for the long term to build lasting client relationships and enhance overall sales numbers. This means that salaried sales reps may be able to take advantage of extensive training opportunities and other benefits, such as employer-sponsored health insurance and reimbursement for business expenses, like gas mileage.
Base Salary Disadvantages
Base salary sales jobs may offer stability, but they also come with vastly reduced commission potential. Elite sales reps in certain sectors may be able to earn a lot more on commission alone than they could by working for a flat rate salary with a minimal commission percentage. Salaried employees may also have to deal with more formal office settings that include obligatory meetings and company activities that essentially reduce the amount of time actually spent making sales, thereby limiting the prospects for making extra money from commissions. Finally, salaried employees generally have to pay higher income tax rates than self-employed sales agents working solely on commission.