Basics of Total Rewards

Sales Incentives

Sales incentives are financial rewards, such as a commission, offered to salespeople for meeting or exceeding a sales goal.

The goals that need to be met in order for a salesperson to receive incentive compensation are specific and measurable. The incentive is usually paid in the form of cash.

The basic categories of sales incentive plans are:

• Commission-only plans: The employee's pay is based upon a set percentage of the total amount that he or she sells.
• Commission-plus-draw plans: The employee is advanced a set amount of money as a paycheck at the start of each pay period. The total amount the employee receives is called a draw. Then at periodic times, such as the end of the pay period or each quarter, the total commissions due the employee are calculated. The draw is subtracted from the commissions and the employee receives the remainder.
• Salary-plus-commission plans: The employee receives a base salary and a percentage of his or her sales.

New-economy organizations:

• Have more aggressive sales plans than traditional companies.
• Reward specific "target" takeovers of competitors’ business.
• Have a lower rate of account loss than those of the past.
• Attract key sales talent with competitive base salaries, draws against commission, and high incentives, resulting in higher turnover than in traditional companies. Traditional companies use low draws and high incentives.
• Have fewer complex sales plans than traditional competitors. Commissions from first dollar of revenue are common.
• Give less automobile expense reimbursements than in the accounting-focused traditional organizations. Also, these organizations may not take advantage of Fixed and Variable Rate Automobile allowances.
• Many sales roles are inside sales with sales representatives conducting their jobs over the phone, internet interactions such as chat, and by email without required travel to visit potential customers.

For more information about compensation of sales employees, please see DLC Course 76: Sales Compensation and Expense Allowances.