What are some opportunities and some threats you get when on salary vs commission

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gsenviro eNotes educator| Certified Educator

There are pros and cons of being on salary vs. commission.

Salary offers an assurance in terms of a fixed, dependable pay check every month and employees can budget their expenses accordingly, without worrying about shortfalls in pay check at any given time. Salaried employees also tend to provide better customer service, since they do not have any incentive for making extra money by pushing most expensive product/service to the customers. However, salary does not distinguish between better, average and below-par performers and may cause dissatisfaction among top performers.

Commission based packages offer an incentive for higher sales and people with better sales skills tend to benefit  from such pay structures. Commission motivates people to go beyond the minimum requirements of job and top performers reap the rewards of their hard work. The employees also feel more involved because they are sharing in the success of the company. This is also beneficial for the employer as sales are rising because of people working harder and overall profits will rise. The company also benefits since it does not have to pay fixed salaries and the payments are proportional to the sales. The downfall is the poor customer relations because of people selling the most expensive product or the product that pays the highest commission, without thinking about long-term relations with the customers. 

In general, there are opportunities and threats in both the cases for both the employee and the employer. Based on the business, one or the other (or a combination, in terms of fixed base pay + commission) may be beneficial.