No sales representative earns his or her base salary for just “showing up.” Your sales compensation plan needs to specify clearly the activities for which reps are paid a base salary. Here’s some language I’ve used in the past:
Base salary is paid for the timely and accurate completion of administrative and other tasks associated with the generation of business volumes, including:
Draws Against Commissions – Why offer these?
As an alternative to base salary, you can offer draws against future commissions to address sales reps’ needs for start-up or short-term cash flow. A draw is a loan your company provides to a sales representative that is repaid by earned commissions. Draw amounts are usually negotiated with sales representatives for a defined start-up period when they are hired. The draw is designed to provide the sales representative with nominal cash flow while he or she is focused on developing the territory. For businesses with seasonal cycles, draws can also be used to provide reps with more predictable cash flow. Be aware, though, that some states’ require draws to be forgiven, or treated as salary, if a sales rep resigns or is terminated before it is repaid. New York is an example of one such state.
Wallace Management Group Can Help
At Wallace Management Group, we’ll help you design and implement sales commissions plans based on your company’s goals and strategic plan. We’ve written sales compensation plans for small, medium and large companies in industries ranging from technology to manufacturing, industrial services, distribution and logistics.
We’d like to help you achieve your sales and marketing goals. Contact us to discuss how we can help you drive more business.