Question

Discuss the benefits of sales commissions in addition to base salary for sales staff. Further elaborate on commission only sales positions and the advantage/disadvantage of this type of compensation.

Answer 1

Benefits of sales commissions in addition to base salary for sales staff:
1. It provides better income security to employees and they hence attract more employees
2.Here cost budgeting can be done accurately to some extent as compared to pure commission based salaries.
3. This also encourages employees to work extra hard for more income.


Advantages of commission only sales:
1. Expenses only occurred when revenue is generated.
2. Motivating higher efficient salesman by paying only when sales are generated.

Disadvantages of commission only sales:
1. this leads to intense e competition among salespeople.
2. Low income security might attract fewer employees and the company might miss out from some talented salespersons.
3.The costs planning cannot be done properly in commission basis since it might fluctuate highly.