Looking to Benchmark Pay?
Combination Plans
Most sales compensation plans are a mix of base salary and commission/incentives.
The reasons for this are:
- the salesperson is not the only influence on sales volume
- some parts of the sales job do NOT involve direct selling and these responsibilities (e.g., training, recordkeeping, reporting) also need to be rewarded.
Done properly, a combination plan should contain the advantages of both straight-salary and incentive plans.
What's the mix?
A mix of 60% base and 40% incentive is the typical pay composition for sales positions. The more independent the sales representative is in obtaining and closing the sale, the higher the sales incentive.
The incentive portion will be lower where:
- there is a team sales environment
- there is a longer sales cycle
- the direct contribution of the salesperson to sales volume is low
- non-sales activities are valued by management
- there are considerable variations in sales over time and between sales areas
Sales mixes may be as low as 95:5 and as high as 0:100. Management practices and culture of an organization will also influence pay mix.
Memory Jogger
If your organization requires salespeople to independently obtain and close sales and not participate in non-sales activities, the incentive portion of a combination plan should be: