When applying for a new job, one of the biggest factors in your decision to accept an offer is likely to be the level of income you’ll make. What you might not realize is the array of payment models that various companies employ. Considerations like biweekly versus semi-monthly pay are important, as is whether you prefer to work for a predetermined salary or have the flexibility of earning a commission.
As a job seeker, you need to be aware of the pros and cons associated with commission versus salary pay and how it can affect your job satisfaction. Here are some things to consider when weighing the advantages and disadvantages of each payment model.
Advantages of Sales Commissions
If you are considering a commission-only position, this means you agree to be paid a certain amount based on the percentage of the sale of goods or products sold, closed deals, and other sales targets.
Straight commissions mean that employees are paid only by commissions based on their individual performance. This payment option is how some businesses recruit qualified, self-motivated salespeople. They can control how much they make with no salary cap, which can result in a significant annual income if they perform well.
Many businesses offer monetary incentives for achieving quarterly or team goals based on a tiered commission system. It is also possible for a business to use a draw against commission pay structure, in which employees receive income based on future commission projections.
Cons of Sales Commission
At different times of the year, there could be slow periods for your company, affecting the amount of straight commissions you can receive in your position. The unpredictability of your income due to the commission payment model is not ideal for all lifestyles. It can be challenging for people who are not good at budgeting their income for future bill payments during a slower sales period.
Since your commission-based position depends on the percentage of a sale, you may be faced with pressure to meet sales targets. This can result in a stressful work environment that does not suit all personality types. In some cases, you could face pressure to sell products or services to clients that do not benefit them. These actions could cause a moral conflict on your part, leading to dissatisfaction with your role in the company.
Benefits of Salary Pay
Salary-based pay is the traditional method of compensating workers, and it is simple.
Your base salary is based on your skills, experience, and your industry’s standard salary for your position. You receive a steady paycheck per pay period, be it weekly, biweekly, semi-monthly, or monthly, alongside healthcare benefits, vacation time, and retirement.
Working on a salary basis also means you have the flexibility to budget for your financial future and know the amount of income you will receive depending on your pay period.
You may also have greater freedom to plan your work schedule if you need to leave early for a healthcare appointment or if you are planning to take time off for a vacation. Depending on your industry and work culture, your employer may even allow you to schedule your work hours to fit your lifestyle.
Cons of Salary Pay
Salaried employees are exempt under the Fair Labor Standards Act (FLSA). As a result, you may be expected to work longer hours without additional overtime pay, which may lead to feelings of burnout if an employer frequently expects you to work more than 40 hours a week.
A set salary may limit an employee’s ability to increase their annual income unless they are in line for a promotion or leave the company to take on a higher-paying role. At worst, financially distressed companies may also end up cutting employee salaries to control their expenses.
The Benefits of Paying Sales Commissions vs Salary Pay
The determination of whether a commission or salary arrangement is better depends on personal preference. Some workers thrive under the pressure of a commission-based sales environment and love the ability to increase their income if they perform well. For others, the stability of a salary position makes it easier to manage their finances and maintain a positive work-life balance.
Decide which option suits you best before heading into the application process so you can focus your energy on positions that meet your needs. As a job seeker searching for a new opportunity, online job boards are a valuable resource. jobsfuel.com helps potential employees find what they’re looking for.