Consultant’s Corner: Transitioning to a Commission Pay Structure
Question: How do I go about hiring a sales team to work on commission instead of salary? Is it legal for me to have a person working for me that gets paid nothing?
Minimum Wage Regulations
The following information from the Department of Labor indicates that outside sales jobs are not subject to minimum wage laws and could possibly receive no pay other than earned sales commissions:
Converting Sales Staff from Salary to 100% Commission
Of course, many businesses use manufacturer reps or other independent sales reps; however, we assume that you are planning to retain sales employees and not switch to independent reps/contractors. Without any employee contracts or company policy restrictions, you may be able to legally change the compensation structure for your sales staff to a form of 100% commission, though this will likely be a sensitive issue and could be disruptive to your sales staff.
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The salary structure has become more popular for retailers and other types of businesses. Also, a base-versus-commission structure is common. Often small and other businesses with volatile or less predictable sales have difficulty attracting and retaining 100% commission sales staff; however, companies with extensive sales history may be in a position to demonstrate to their current salespersons how a 100% commission structure should not significantly reduce their compensation from their current salaries and gives them the opportunity and incentive to make more money by selling more.
To help assess a sales staff compensation structure change and consider a fair commission rate for your salespersons, you can locate discussions and market salary information on sales rep commissions at websites like the following:
How to Pay Your Sales Staff
Market Compensation Information
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