Commission sales plan essentials…

I am frequently asked about commission sales plans. If you have a commission sales plan in your organization, keep the following points in mind:

• Only OUTSIDE sales are exempt from overtime requirements. The Fair Labor Standards Act allows an exemption from overtime only for those sales made in the customer’s place of business or home. Sales made from the employer’s place of business, over the Internet, by mail or by telephone do not qualify for the exemption. Reps engaged in these sales must be paid overtime for any hours over 40 in a workweek regardless of how much that actually make in commissions.
• Plan your commission structure carefully.  To a great extent, your sales reps’ focus depends on the way they are paid. You can’t throw your plan together at the last minute. Each element of the plan should be considered with care. Whatever you do, avoid making your plan too complicated or too easy.
• Your commission plan should reflect your sales strategy. Do not copy your plan from another company or base your plan entirely on a model you read about in a book or magazine. Your plan must be based on your sales strategy, not on that of a competitor.
• You get more of what you pay for. If you increase commissions on a particular line or product, your sales reps will sell more of that line or product. Be careful that you don’t make selling a particular line or product so attractive that your other line sales actually suffer.
• Think carefully about volume-only commissions. If your commission structure is based solely on volume, your reps may be tempted to discount more than is necessary and ignore the need for ongoing customer service.
• Think carefully about customer service factors in your commission formula. While including a customer service measure in your commission formula is probably a good thing, guard against rewarding customer service at the expense of additional sales.
• Remember your top sales reps. When you have your plan designed, run a few tests to see how the plan impacts your top producers. If it hurts them, change the plan.
• Rollout your plan with care. Once you have your compensation plan designed and tested, plan your rollout carefully. Consider how you will sell your plan to your sales people so they are motivated to make that next sale.

If you have questions about this or other human resources issues, please contact Business Advantage International or Allen Miller at 801.444.9919.