What Is Going on With Sales Compensation These Days?

Sales compensation is a complex topic. For newbies in the sales industry, commission and different incentive structures can be hard to understand. Recent surveys reveal interesting shifts in trends, highlighting the changing landscape of rewarding today's sellers. Whether you are in sales or simply curious, understanding these changes is useful.

Sales Compensation Trends: What the Latest Survey Shows

Companies often use salary surveys to gather valuable data to keep up with salary trends. As the workforce evolves, sales compensation changes as well. Here is what most surveys say:

Base Salary on the Rise

The latest surveys show base salaries for sales representatives are increasing. Companies realize they need to give competitive pay to attract top talent. The average base salary increase was 3-5% over last year according to several surveys.

Commission and Bonus Growth

Along with base pay, commission, and bonus opportunities continue to rise. Companies want sales reps motivated to exceed targets, so they are creating better offers. Commission rates increased an average of 2% and bonuses were 10-15% higher compared to previous years.

Benefits and Perks

Companies are boosting benefits and perks to recruit and keep the best sales reps. Extra vacation days, student loan repayment, gym memberships, and tuition reimbursement are popular. Some companies even offer sabbaticals for long-term employees.

Sales compensation is going up, but it varies based on industry, experience, and company. People must research to ensure they get a good offer.

Base Pay vs. Commission: Shifting Comp Models

These days, fewer sales representatives earn commission-only pay. Instead, many companies are now moving toward compensation models. This offer provides them with a base salary plus commissions and bonuses.

According to recent surveys, nearly 60% of companies now offer reps base pay, usually $35,000 to $65,000 per year. Why is this so? For one, base pay provides salespeople stability and predictability. It allows companies to attract top talent in a competitive job market as well.

At the same time, companies do not want to lose the motivation that comes with commission-based pay. They are experimenting with compensation models that blend the two. A popular approach is to pay a lower base salary, like $45,000, plus commissions and bonuses that can double total pay for high performers.

Other companies pay a higher base, around $60,000, but cap commissions at $30,000 or $40,000. The idea is to motivate reps to achieve targets but avoid paying out r massive commissions.  Usually, a fair mix of salary and commission helps keep top salespeople motivated and happy.

Why Variable Pay Is on the Rise for Sales Teams

These days, more and more companies are moving to variable pay models for their sales teams. This means that most of what salespeople earn comes from commissions and bonuses, not from a set salary. There are a few reasons why variable pay is becoming more popular:

Performance Motivation

When a big portion of your pay relies on how much you sell, you need to work extra hard to make more deals. Variable pay plans give bonuses to top achievers, so salespeople feel motivated to give it their all.

Cost Efficient

Variable pay reduces costs for companies. When salespeople do not meet their targets, the company is not obligated to pay them as much. This can save money, especially when sales are down. Of course, the top performers will still get rewarded handsomely when they exceed their goals.

Goal Setting

Variable pay aligns the goals of salespeople and companies. When salespeople mostly earn through variable pay, their pay is directly linked to how well the business does. The more they sell, the more they make, so everyone wins. This synergy leads to a highly motivated, energized sales team.

Flexibility

Variable pay structures provide flexibility for both employers and employees. Companies can adjust incentive plans based on changing business needs. It lets employees earn more based on what they do, too.

While variable pay is not for every sales role, for many companies the pros far outweigh the cons. When implemented well, it can be a win-win for both the company and its sales teams. The key is finding the right balance of base pay and variable compensation that works for your situation.

Designing a Sales Compensation Plan

The trends in sales compensation may change from time to time. But no matter how you keep up with the trends, your compensation plan will not work when not done right. Here is what to keep in mind when designing an effective sales compensation package:

• Sales Targets

Establish both realistic and challenging sales targets that motivate representatives to perform well. Consider rep performance history, industry trends, and market conditions. Create incentive plans that reward high performers and desired behaviors. Consider SPIFs, bonuses for hitting stretch goals, and team incentives.

• Compensation Structure

Determine the percentage of base pay vs. variable pay. Generally, higher-performing reps must have a higher percentage of variable pay.

• Compensation Benchmarking

Research industry trends for sales compensation to ensure your plan is competitive. You will need to attract and keep top talent.

• Plan Simplicity

The simpler and more transparent the plan, the easier it is for reps to understand how they get paid. This reduces frustration and confusion. Include flexibility to change targets, thresholds, and payouts based on business changes. Communicate changes clearly to reps.

By remembering these, you can make a sales pay plan that helps salespeople do better and matches your business goals.

Conclusion

The sales compensation landscape is changing. Base pay and benefits are crucial, but variable pay and incentives are gaining traction for boosting performance. Companies are innovating with contests, SPIFFs, and recognition programs. Sales reps must keep up with industry compensation trends to optimize their earnings.

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