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About Commission-Only Employment Agreements

Many companies use a commission-only payment structure to compensate their sales staff. This type of compensation has the capability to cut overhead costs, but it can also cause some issues for employers. If you have the proper skills, working with a compensation-only pay system could provide you with an unlimited amount of income.

How It Works

The basic idea behind a commission-only pay structure is that you are paid based on what you produce. You get a percentage of each sale that you generate as a salesperson. Depending on the industry, this may entail you going out and developing your own leads or you might get customers as they come in the door. Regardless of how the sales are generated, you get a portion of what you sell each month.

Unlimited Potential

From the perspective of someone who works for commission only, this can provide an unlimited amount of income. One of the problems that many employees have is that they feel like they cannot earn any more money, regardless of how well they perform. With a commission structure, the employee gets to decide how much he wants to earn. If he performs well, he can be compensated for this extra effort with extra pay.

Lack of Security

One of the potential disadvantages of working under a commission payment arrangement is that it does not provide financial security. You have to perform well every single month if you want to make this type of arrangement really work. If you have even one bad month, it could result in not getting a paycheck. Since many people live from paycheck to paycheck, this could make things difficult. Some would prefer to get some type of guaranteed pay.

High Turnover

While some industries regularly use a commission-only payment arrangement, others are starting to get away from it. While at first glance, this arrangement may seem to have the potential to lower overhead, it does not always work out that way. In many cases, this arrangement leads to high turnover. Then the company's costs increase because of the expense of training new employees constantly. It is sometimes better for companies to invest more resources in retaining employees.



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