Are you about to enter the world of commission-based employment, or are thinking about doing so? If so, then it’s in your best interest to do your homework and learn as much as you can about how it all works before jumping in—because things operate a little differently within this world than within other types of employment.
Commission-Based Jobs 101
At its core, the world of commission-based jobs is structured around a specific compensation model: a portion of your work earnings, which can range from an additional income on top of your full fixed salary to a specific percentage of your earnings (all the way up to 100% in some instances), comes from your ability to reach a pre-determined target goal within a specified timeframe.
Here’s an example:
You’ve just been hired as a salesperson for a company that sells telecommunications services and hardware to businesses in your local area. As part of your compensation package, you are given a modest guaranteed base salary, but also earn 1% commission on all annual sales for the first $100,000 in sales you close, and 5% commission on all annual sales above $100,000 that you make.
Under this structure, it’s easy to see why you’d be eager to sell—and sell hard. Sure, your base salary is guaranteed, but for salespeople, it’s often modest compensation. The real success comes from hard work and not just hitting your target annual sales goal, but absolutely crushing it and sending you commission soaring. (A quick reality check: do keep in mind that commission is still taxed income.) Also, a salesperson who consistently fails to hit their target sales goals might not find themselves employed for very long. This means that commission-based employment can be stressful, as you’re constantly vying to hit your targets.
Would you thrive in this work atmosphere?
If you’re thinking about entering this world and considering whether this type of work is right for you, make sure you’re the sort of worker who thrives under pressure. That said, the good news here is that as a commission-based employee, your earning potential is theoretically limitless (unless there is a pre-determined commission cap, which is not unheard of)—your compensation scales up with your level of determination and success.
Keep in mind that the example provided is just that—one specific snapshot for one specific position. Commission-based compensation is not just relegated to the sales world; companies across many sectors are embracing this model to help employees strive toward achieving all types of target goals. Also, the deal points in commission-based compensation packages can vary wildly, based on such variables as industry, position, and your individual experience level. That said, there are often certain industry-wide standards that you can refer to in an effort to evaluate a job offer that you’re considering. For example, you can check out Glassdoor and Salary.com (among others) to find out what other folks in your field, position level, and geographical location are earning. (We suggest using these as rough guides, as actual compensation can vary.)
Know the specifics before you dive in
When working on a commission basis, you’re definitely going to want to know when you can expect to receive your commission checks, right? It’s a great question, but like most things in life it doesn’t have a “one size fits all” answer and will vary based on company, with most businesses following either a monthly, quarterly, or yearly payment model. Again, know what structure your prospective employer follows when evaluating a job offer, and make sure that it’s a structure that works for you.
Also keep in mind that a “probation period” is often factored into compensation for new hires, during which you may be primarily focused on learning and training for your new job (in addition to being evaluated by your new employer) and may not be earning a commission. This timeframe can vary and is an accepted facet of commission-based employment. Once again, the key takeaway here is to be fully aware of the many specifics of a job offer when determining if it’s right for you.
So … after learning the ins and outs of commission-based employment, your next step is to determine if it’s the right type of work for you. Are you the type of person who likes to have clearly defined target goals? Do you operate well under pressure? Are you comfortable with the uncertainty and variance in compensation? If so, then you may be well suited to pursue a job that offers a commission-based salary.
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