Sales representatives are the frontline personnel of a company, and a reasonable compensation system can fully motivate their work enthusiasm. The old egalitarian system where working more or less made no difference has been completely replaced by a system where more work means more pay. As for how much sales personnel should earn, and how much companies should pay, this requires establishing an effective salary system. The market for "buying power" and "selling power" is always contradictory, but it is by no means irreconcilable. The key to reconciliation is to formulate a fair and reasonable compensation system, which is the driving force for retaining talent and maintaining corporate development. Based on years of experience serving many companies, I have summarized six salary systems, among which the first three are more common, while the latter three are gradually being implemented by many companies.
High base salary + low commission With a base salary higher than the industry average, and commissions slightly lower than or equal to the industry average, this system is mainly implemented in foreign enterprises or large domestic companies. For example, a domestic home appliance company in Shanghai offers its sales representatives a base salary of 4,000 yuan with a 1% commission, which is a typical high base salary plus low commission system. This system is easy to retain loyal veteran sales representatives and stabilize some capable talents. However, this system often requires sales representatives to have certain educational background, foreign language proficiency, and computer skills, so it is relatively difficult to enter, with higher thresholds.
Medium base salary + medium commission With the industry average base salary as the standard and industry average commission, this system is widely used in many domestic medium-sized enterprises. It is very attractive to sales representatives who are capable but have lower educational qualifications. Sales representatives considering long-term development in such enterprises are mainly influenced by traditional Chinese moderation, feeling neither too good nor too bad. Currently, most domestic enterprises adopt this salary payment method.
Low base salary + high commission With a base salary lower than the industry average, or even at the local minimum living standard, and commissions higher than the industry average, this system is widely used in many domestic small enterprises. It not only effectively promotes the work enthusiasm of sales representatives but also avoids excessive labor costs for the company. It is attractive to sales representatives with excellent abilities, rich experience, but lower educational qualifications. The most innovative is a domestic health product company that adopts a service marketing system. Its salary system is: local minimum living standard (450 yuan) + completed business volume × specified percentage (10%). This salary system often leads to two extremes: the capable ones often have too much, while the weak ones often have too little.
Task decomposition This is a relatively new salary payment principle that can fairly pay each sales representative and completely break the traditional base salary plus commission system. A company has 10 sales representatives, and in April 2005, the sales target was set at 500,000 yuan, so the average task per person is 50,000 yuan. When a sales representative just completes their own task of 50,000 yuan, they receive the average salary of 3,000 yuan. The specific payment method can be calculated with a mathematical formula: average salary × completed task ÷ task amount = due salary. According to the above example, when a sales representative completes 100,000 yuan in sales, the salary should be 6,000 yuan. This salary system simplifies the process, allowing each sales representative to clearly know how much they can earn. It can fully motivate excellent sales personnel and make it impossible for those who are just going through the motions to survive.
Target high salary system As the name implies, this is a salary system where reaching a standard allows you to get a high salary. For sales personnel, there is a peak to strive for, which is not out of reach and should be attainable by about 10% of very capable sales personnel. This can stimulate more sales personnel to strive for the goal. A sales company adopts the target high salary system, offering sales representatives a salary of 10,000 yuan per month. Sales personnel must achieve a sales performance of 200,000 yuan to get this 10,000 yuan salary. The difference between the average sales representative and the 200,000 yuan target is deducted at 8%. For example, if they complete 100,000 yuan, the actual salary paid is only 2,000 yuan. The specific payment method can be calculated with a mathematical formula: Highest salary - (highest task amount - actual task amount) × specified percentage = due salary. The "specified percentage" here is very critical and should be slightly greater than (highest salary ÷ highest task amount) × 100%.
Stage assessment system This salary system also adopts the base salary plus commission system, with monthly salary payments, but includes a quarterly assessment indicator, using quarterly summary assessment. The specific operation is that when paying monthly salary, the commission is not fully paid. For example, only 3% of the commission is paid, and the remaining 5% is paid after three months, based on whether the total performance meets the target, and then the cumulative commission for the three months is paid. This method can effectively prevent sales personnel from delaying the performance that should be completed or prepaying next month's performance, and effectively reduce the situation where capable sales personnel leave before completing three months. For sales personnel, every three months there is a considerable "extra" salary, equivalent to four extra salary payments a year. From a psychological suggestion effect, it is also a significant encouragement to sales personnel.
Of course, there are far more than the above six salary systems. Regardless of the salary system, retaining talent and ensuring sustainable development of the enterprise is the ultimate goal. For a company, there is absolutely no such thing as paying sales personnel too high or too low; only whether the salary is paid correctly or not.
I believe that for enterprises with high talent turnover, widespread complaints about salaries among sales personnel, and a general lack of work enthusiasm among employees, appropriately changing the salary system once can also be an effective method.
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