Home > Ask SmallBizClub > Sales > How do I go about hiring a sales team to work on commission instead of salary?

How do I go about hiring a sales team to work on commission instead of salary?

How do I go about hiring a sales team to work on commission instead of salary? Is it legal for me to have a person working for me that gets paid nothing?

Answer:

Minimum wage regulations: The following government and labor information indicates that outside sales jobs are not subject to minimum wage laws and could possibly receive no pay other than earned sales commissions:

“Executive, administrative, and professional employees (including teachers and academic administrative personnel in elementary and secondary schools), outside sales employees …..”

Converting sales staff to 100% commission: Of course, many businesses use manufacturer reps or other independent sales reps; however, we assume that you are planning to retain sales employees and not switch to independent reps/contractors. Without any employee contracts or company policy restrictions, you may be able to legally change the compensation structure for your sales staff to a form of 100% commission, though this will likely be a sensitive issue and could be disruptive to your sales staff. The salary structure has become more popular for retailers and other types of businesses. Also, a base-versus-commission structure is common. Often small and other businesses with volatile or other less predictable sales have difficulty attracting and retaining 100% commission sales staff; however, companies with extensive sales history may be in a position to demonstrate to their current salespersons how a 100% commission structure should not significantly reduce their compensation from their current salaries and gives them the opportunity and incentive to make more money by selling more.

To help assess a sales staff compensation structure change and consider a fair commission rate for your salespersons, you can locate discussions and market salary information on sales rep commissions at websites like the following:

Market compensation information:

Published: August 2, 2013
3252 Views

Matt Tarkenton

Matt Tarkenton is Executive Vice President at Tarkenton Companies. He was part of a group that started Renova Partners, a boutique investment bank, and was recognized as a “40 Under 40: Up and Comer” by the Atlanta Business Chronicle in 2009. Matt performs business planning and marketing training for hundreds of professionals across the country, and co-hosts a weekly coaching program on entrepreneurial education. Matt graduated from Princeton University, where he was a member of the 1989 Ivy League Championship Football Team, and received an MBA from Harvard Business School.