I had question from a client this week that stuck with me. How do I pay the new employee? Meaning a salary or commission structure.
It is a family run business looking to employ a Business Development Manager, a big step for a small business with only five staff.There are pros and cons to both options for the employee as well as the employer.
A salary is the most straightforward type of pay. Your employees receive a fixed annual amount paid out over the course of the year. Salary pay offers the stability and consistency. Employees can more easily budget and feel less pressure when you guarantee their pay.
Payroll workers also find salary compensation systems easier to implement.Salary does not have the motivating ability of commission.
With commission pay, which is common in sales jobs, you generally pay employees a percentage of the revenue they generate. Commission has more of a motivating effect in that it drives workers to deliver better results. It also improves the cash flows of the business because it means that employees are only paid when money is coming in from a sale.
Some employees struggle with commission pay, though. It lacks the stability and guaranteed income of other compensation systems.