How does sales compensation work?
Sales compensation programs general work on a combination of straight salary and commissions and bonuses. The exact program will generally vary based on the type of firm and on the goals that the firm has.
Most sales compensation programs pay a salesperson a base salary, but also offer incentives to promote more effective selling. In other words, a salesperson will typically be paid a salary for coming to work and putting in their hours. So long as they remain with the firm, they get at least this much money. However, salespeople are also given the chance to earn more money. This money often comes in the form of a commission. The salesperson is paid a percentage of the price of the sale. This makes it so that the salesperson has an incentive to sell as much as possible and to sell things that are of higher value. There are also some sales compensation programs in which bonuses are given. These bonuses can be given to salespeople who reach certain threshold levels of sales. They can also be given to people who win special competitions that can be held during the course of a year.
Thus, sales compensation programs typically include some combination of salaries, commissions, and bonuses.