What Is an Incentive Paid to a Salesperson?

Incentive pay helps motivate high-achievement salespeople.

Incentive pay helps motivate high-achievement salespeople.

A common incentive paid to salespeople is commission. This is money paid based on a percentage of sales created. As salesperson you may also receive a bonus based on individual, team or company sales performance. Some companies pay you incentives on top of a straight salary, though some industries, such as auto sales, are mainly commission-driven.

Purpose

The primary purpose of including incentive pay as part of a salesperson's income is to motivate strong performance. Salespeople are often driven by a combination of financial rewards and personal accomplishment. Incentive pay allows an organization to play off both. They can tie pay to achievement; consequently, salespeople who generate a high volume of sales can earn top pay.

Commission Basics

With commission pay, you earn additional income for every unit sold, or for each unit sold beyond a base quota. A salesperson paid a 5 percent commission on $100,000 in sales, earns $5,000, for instance. A salesperson with a quota of 100 widgets who sells 130 in a month would get paid commission on the 30 extra units. He might get 25 percent of the sales value on those 30 widgets.

Individual Bonuses

In addition to, or in lieu of, commissions, you may earn bonuses for sales performance. A salesperson might have a quota of 50 widgets but earn a $500 bonus for every 10 additional widgets sold above the quota. Some sales organizations pay monthly, quarterly or annual bonuses, or a combination of these structures. You might get a flat $5,000 annual bonus, for instance, if you achieve a certain threshold of sales over the year.

Team or Business Bonuses

Some organizations use sales teams and reward salespeople based on collaborative success. All team members may share in a $10,000 quarterly bonus for achieving a certain sales volume, for instance. While this can encourage collaboration and team effort, it can cause conflict if some team members don't carry their weight. Car franchises often pay individual dealerships periodic bonuses for sales performance. This money may go to the dealer owner, sales managers or the entire sales staff.

 

About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.

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