Should You Choose Salary Plus Commission? Here’s Everything You Need to Know!

Every sales manager is deliberating how they can make their sales rep engaged and driven.

Surely the answer is in the question itself. Sales commissions. But which? 

Of all the commission structures, finding the right one that is the perfect mix is important. 

If you are looking for a sales commission structure that strikes the perfect balance between engagement and drive, then it's salary plus commission. 

In this article, we will explain everything you need to know about salary plus commission. Its definition, its working, advantages and disadvantages and a few tips to improve your incentive management. 

Let's begin. 

What is salary plus commission?

Salary plus commission is a commission structure where sales reps enjoy the best of both worlds. 

Their structure includes two parts: a fixed base salary and a variable pay. 

This means, irrespective of how sales reps perform, they will receive a fixed monthly pay. 

At the same time, with strategic efforts sales reps can unlock the potential for limitless earnings through their variable pay. This variable pay is calculated as a percentage of the sales they generate.

This is the catch of the salary plus commission structure—it offers financial stability while opening the door to endless earning potential.

 How does salary plus commission work?

Salary plus commission structure works on very simple principles. 

Imagine a company with a salary plus commission pay structure. They offer a fixed base salary of Rs30,000 and a 5% commission rate for each deal they close. 

So the final monthly income of the sales rep will be:

This month, Ravi, who works in the SaaS industry, closed two deals of Rs 50,000 and Rs 1 lakh monthly subscriptions. His final paycheck will be:

With better efforts, Ravi can close more deals and bring his salary to even higher amounts. 

This simple example shows how a salary plus commission structure pushes sales reps to close more deals while giving them the financial security of a steady package.  

Advantages of Salary Plus Commission

Salary plus commission is your key to providing stability with drive. But that is just one reason why many sales managers and reps prefer it. 

Let us look at why sales reps and managers favour this commission structure: 

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Sales rep:

1. It gives financial stability and security for sales reps, no matter how they perform. 
2. The promise of higher commissions motivates sales reps to close more deals. 
3. There is no limit to your earning possibilities. You sell more, you earn more. 
4. Even during slow market seasons, it provides sales reps a safety net to rely on. 

Sales managers:

1. Sales managers use salary plus commission as a powerful motivational tool. 
2. Fixed salary strengthens budget planning and prediction compared to the commission-only model. 
3. A strong pay structure helps attract and retain top-performing reps.
4. Managers can align rewards with desired behaviour, goals, and outcomes to drive strategic performance.  

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Salary plus commission is a solid pay structure that makes it a smart choice and makes it worth choosing.

Disadvantages of Salary Plus Commission

No matter how attractive a salary plus commission looks, it’s not all rosy petals and effortless success. It comes with its own set of challenges.

So here is a list of hurdles it poses for both sales reps and sales managers:  

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Sales reps: 

1. Salary plus commission provides a lower commission rate as it is intended that the fixed pay provides security. 
2. Even during peak selling seasons, the earning potential for sales reps is lower compared to the commission-only model.
3. Salary plus commission gets complex to calculate with the fixed pay, variable pay, rates, tiered structures, etc.
4. Sales reps are still expected to consistently meet their targets, which can create pressure and stress.

Sales managers: 

1. Sales managers must pay the fixed salary to even underperforming sales reps, which can increase the company’s financial risk. 
2. High-achieving sales reps receive higher pay at the end of the month, which can create tension within the team.
3. Striking a perfect balance between fixed and variable pay can be hard, which leads to employee dissatisfaction. 
4. Customizing incentives for all team members becomes difficult with varying commission rates and targets.

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Do you think you can handle these challenges and make the best use of salary plus commission? Then it is a perfect fit for you. 

Key Considerations and Practical Tips for Salary plus Commission 

If you still believe salary plus commission is the right fit for your sales team, here are some tips to help you make the most of it.

1. Review your finances to make sure the structure is sustainable and fits your business model.
   
   
2. Compare commission plans and study industry benchmarks to find what best supports your goals and keeps you competitive.
   
   
3. Strike a healthy balance between base pay and commission to give your team both stability and motivation.
   
   
4. Set clear expectations by defining commission ratios, KPIs, and performance metrics upfront.
   
   
5. Communicate the plan openly so everyone understands how it works and what success looks like.
   
   
6. Stay in tune with your team’s expectations and be ready to address concerns or challenges that come up.
   
   
7. Be flexible and refine as needed. Compensation plans may need tweaks to fix issues or adapt to changes.

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Keeping these tips in mind will help you make judicious and right choices that keep your sales compensation plan running smoothly and efficiently. 

Conclusion

Salary plus commission isn't a one-size-fits-all solution. But it has its perks. 

The commission structure strikes a perfect balance between financial security and sales motivation. With the fixed pay, sales reps feel stability. While the variable pay drives them to achieve their goals and go beyond it. 

With thoughtful planning and clear communication, sales managers can drive both sales performance and employee satisfaction. 

Want to explore the latest incentive compensation practices and trends?

Visit Kennect to discover how leading teams are simplifying and scaling their incentive strategies.

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