Commission does not motivate people to work harder in general. It tells them precisely what to prioritise. Which means a badly designed scheme produces exactly the wrong behaviour, reliably.
Pay on collection, not on sale
The single most important choice. Commission on invoices raised produces sales to anybody who will sign, including people who never pay.
Commission on money received aligns the salesperson with the business completely, and it turns them into a collection ally rather than somebody who considers the job finished at the order.
Keep it calculable in their head
If the scheme needs a spreadsheet, it has stopped working as motivation. "Three percent of collections" is understood by everyone. Sliding scales with four bands and product-wise variations are understood by nobody, including the person who wrote them.
Protect the margin
Commission on revenue with the salesperson free to discount is a scheme that pays them to give your margin away. Either take discounts out of the commission base, or set a floor price below which commission drops.
Pay monthly
Quarterly payments are administratively easier and motivationally weaker. The connection between the effort and the reward needs to be close enough to feel.
Decide the awkward cases in advance
- A customer who returns or cancels
- A repeat order the salesperson did not work on
- An enquiry that came from the owner
- What happens on their notice period
Every one of these will happen. Deciding them upfront is a policy. Deciding them when they happen is a dispute, and the person will remember it long after they have forgotten the amount.
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