Bonus and commission system for sellers and traders

A sales funnel bursting at the seams, contrary to appearances, does not have to herald a champagne opening with a roar and a great celebration.

That is why working with sales departments is an inseparable element of our activities, right after generating leads. We help clients prepare their sales departments for increased lead resources. One of the most common questions arising in this context is what bonus and incentive system for traders to apply in this new situation.

1. As an introduction – the approach to the bonus system

Before we get down to business, let’s take a moment to take a look at the salesperson’s stand. To be successful in this profession, you need to be brave and goal-oriented. This job is a combination between a full-time job and running your own business – not everyone is ready to take such a risk.

Did you know that the salesperson is the second most sought after profession in Poland, right after programmers? It is a job that is not subject to constant procedures, does not have an unambiguous characteristic, or a permanent list of duties related to the position. Is it surprising then that the rotation in sales departments in many companies does not differ from the rotation in many call centers? There are reasons to think that this is mainly due to imprecise working conditions and an ill-considered commission system.

For the majority of society, selling is associated with a peddler who tries to equip us with a 30-volume set of encyclopedias at all costs, and not with a modern trader who analyzes our needs and, using his abilities, awakens in us the desire to buy a specific thing. Exceptional skills are really needed here. Contrary to popular opinion, a few e-mails and phone calls are not enough to close the sale and make coconuts on commission.

2. On the merits – 2 conditions

What to do to make the legendary “attractive bonus system” a machine that drives sales and builds among employees not only the desire to win a mountain of bonuses, but also a sense of loyalty to the company? How to start the driving force of any enterprise? And most importantly – how to build a team that, like Michael Jordan and the Chicago Bulls, will win new titles and achieve a streak of wins?

First – make the rules. This is the most important part, without which the next steps make no sense.

Second – introduce specific solutions based on previously established rules.

And above all, remember that there is no one perfect solution. Adapt the plans to the specificity of the company and the conditions prevailing in it. Consult the traders – in most cases, they mainly care about transparent terms of cooperation and the possibility of estimating their payout. Create different combinations of salaries, bonuses and bonuses and see what motivates your team the most. You may even be tempted to create sales incentive packages that will combine commissions, bonuses and bonuses. Sky is the limit!

3. Principles of the commission system

1. Simplicity and predictability – most salespeople choose to do this job for a simple reason – they want to be able to influence the amount of their earnings and this is their main motivator to work. Overcomplicated and difficult to calculate commission systems, which can be easily manipulated by supervisors, are the nail in the coffin of motivation among salespeople. Only a commission system that is well understood by the team will bring tangible benefits.
2. Timeliness – set precise rules for paying a commission or a bonus. Without any combinations. Nothing motivates better to close the month with a good result than the vision of a well-organized transfer on the account. Paying the bonus at a later date, e.g. after the customer pays the invoice, is like receiving a Christmas present in March. It kinda slows down morale, doesn’t it?
3. Focus on global goals – by offering sellers bonuses and sales commissions, we want to mobilize them to act for the most important goals of the company. Plan a structure of sales bonuses based on specific tasks – not necessarily increasing cash flow, but e.g. related to keeping satisfied customers or scheduling a certain number of meetings.
4. Take down the restrictions, or keine grenzen – don’t put limits on the amount a sales rep can earn. Don’t limit your team from pushing your boundaries when it reaches the maximum earning threshold in a given month. Let them work all month at 100% of their abilities.
5. Money is not everything – test different forms of motivation for your traders. Although most of them work mainly for the highest bonus, it may turn out that they can be motivated without additional bonuses, for example by introducing competition, enabling participation in training or becoming a well-known “employee of the month”.

4. Solutions for the bonus and commission system

The amount of salesperson’s salary is a topic that gives rise to a lot of controversy in companies. Applicants for this position should focus primarily on one thing – a large dose of uncertainty. And while it is difficult to predict the final salary level, for goal-oriented people it is a motivation to achieve really good financial results, which is surrounded by so many legends among co-workers in “non-commission” positions.

We distinguish 3 components that may determine the amount of remuneration and motivation of sellers.

1. Basis and commissions:

• Remuneration base – an amount which does not depend in any way on the size of the contracts completed in a given settlement period. Its amount depends on individual arrangements between the employee and the employer. The most common amounts of the base are PLN 2,000 – 4,000 net, and the main factor taken into account when determining its amount is the employee’s specialization and experience. Entering a company with its own client portfolio may also result in a higher salary base.
• Commission on income – the amount obtained from the value in the contract / invoice, without taking into account the employer’s cost. So it is usually much lower than the profit commission – its average value is about 5%. In this solution, the employer takes the risk of an unpaid invoice or a 100% refund due to failure to meet the terms of the contract.
• Profit / margin commission – the remuneration that the employee will receive after deducting all costs related to the performance of the contract. Here, employers can afford much higher percentage thresholds, because they share the real profit. The most common commission amounts are between 20-30%.
• Commission thresholds – the amount of the commission depends on the sales volume, which is divided into specific amount thresholds, e.g. 0 – 3000 PLN net -> 10% commission, 3001 – 5000 PLN net -> 15% commission, etc.
• Disposable or combined? – in the case of subscription products, you can be tempted to pay a commission combined from all customers in the wallet, e.g. once a month. This is a slightly less attractive solution for a new trader to start, especially since the bonuses paid out once are usually higher (15-20%) than the combined ones (approx. 5%), but in the long run they can be a good motivator for continuous action.

2. Sales bonuses:

The amount of the bonus is an individual matter. Don’t overdo it with their quantity, but rather focus on quality and adjust them to the seller’s preferences. It is a good practice to choose two types of bonuses – incentive, dictated by the employer, and activating, chosen by the employee.

• Quantitative bonus on: meetings, number of calls made, messages sent, new CRM records, leads obtained, online presentations, participation in conferences, etc.
• Bonus on reaching the minimum sales threshold or exceeding the set sales threshold in the selected period.
• Quarterly bonus on all contracts concluded at that time – you can set a minimum that the trader must achieve.
• Bonus for the entire department – it is an element more integrating than profit-making, but it allows for the natural emergence of a leader in the team who will motivate the rest to implement the plan.
• Bonus for closing the contract below X days – if the average time of closing the contract in your company is, for example, 20 days, you can additionally reward the seller for each contract concluded below that time.
• Bonus for a set of tasks completed on time – this is quite a controversial bonus, but it gives great results. Each trader has a specific number of tasks to perform. Theoretically, this is the minimum activity for which it receives, for example, a basis. However, you will be surprised how rarely it is fully realized! It is easy to get used to this bonus, and thus it is very unpleasant. This type of bonus keeps in check the basis that each salesperson should fulfill each month and can also be an excuse to lower the salary if it is not realized.
• The bonus depends on any other sales indicators.

3. Financial bonuses:

Bonuses are a very interesting form of motivation, and by the way, they are an ideal recipe for stagnation of energy and pro-sales activities in the sales department. More or less apathy will come to your company sooner or later. At this point, you pull an ace up your sleeve and offer special bonuses – the less sales, the better! Our main goal is to stimulate the creativity of the employee and support him in the realization of the bonus.

What could it be?

• Writing an article for a company blog on any subject
• Preparation of presentations / training / workshops for the entire department / company on selected topics related to sales and more
• Ideas for a unique gift for a key customer
• Public speeches during conferences, networking, training for interested companies that are adjacent to you in the building
• Ideas for the development of the department, not only commercial, e.g. trying out a new tool, project management method, etc.
• Participation in a marathon or other sports discipline, wearing a specially designed company T-shirt
• Working on your own side project, which will help your company at least to a minimal extent, or, for example, rewarding your passion for photography (a dream lens) in exchange for a photo session of employees or a photo report from an integration trip.

Reduction of salary

It all sounds beautiful, but clear rules should be about two sides. Cooperation with the seller must satisfy both the seller and the employer, who cares about the feeling of money well invested in the employee, which will basically “work for themselves”.

When there is a lack of motivation in the sales team, optimal paths (often shortcuts) are created to obtain a commission without having to commit too much to goals. Unfortunately, such a road is a way down, and therefore there should be rules that govern these working conditions as well.

Cutting bonuses is an individual matter, necessary to be agreed with the employee in advance and sealed with clear and transparent rules, which most often include:

• The minimum sale threshold is not exceeded
• Failure to meet the basic package of tasks and responsibilities
• Notorious delays, not only to work, but also, for example, with the preparation of reports, supplementing CRM, providing complete information, e.g. to the contract department

5. Okay – summary

The profession of a trader is amazing – on the one hand it is burdened with risk, but on the other hand it opens up a whole range of possibilities, not only financial, but also doors to interesting relationships and development.

We hope that thanks to this article you have looked at the work of salespeople and their remuneration models from a different perspective. A good commission system is like LEGO bricks – regardless of the fact that we use the same elements, we can arrange it in any way that suits us and our team.

What are the key rules for you, which commission and bonus systems seem to be the most advantageous for you? Can you share your own practices that are not included in the text?