Salary, Commission Or Combination?

That’s what we’ve been asked by many who are beginning to restaff their firms as business begins it’s slow climb back to normal. We’ve covered this topic before but here’s our take.The trend, prior to the recent economic unpleasantness, was definitely swinging towards more salary and less commission, but in the last year we’ve noticed that the salaried method of compensation is becoming less frequently used. We suspect that this is a function of the economy (and practitioners’ inability to pay) rather than the merits and efficacy of the salary method.But minimum wage draws encourage rapid turnover and will not permit the hiring of many of those long-term winners you’ll want in your consultant cubicles.No matter how you cut it (or what you call it), ours is still a commission-based business. To treat players (rookies or veterans) otherwise makes them really believe they’re being paid to consult rather than produce.Here’s an example frequently proposed by owners who recognize that a long-term winner may need some monetary support during the early months while building to their full potential. You can devise your own formula. For the following example, assume that you intend to level off the permanently-paid draw at $1,000 per month, but additional monetary support is neces?sary through Month 6. The amounts shown in this example may vary, but the principle behind this method is still sound.Month Salary CommissionMonth 1 $1,500 10%Month 2 $1,400 15%Month 3 $1,300 20%Month 4 $1,200 25%Month 5 $1,100 30%Month 6 $1,000 35%The entire amount paid is still a draw (with the exception of the minimums you must legally pay). The consultant can also (with your agreement) be given the opportunity to dispense with the sliding scale at any time they feel confident enough to do so.

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Paul Hawkinson is the editor of The Fordyce Letter, a publication for third-party recruiters that's part of ERE Media. He entered the personnel consulting industry in the late 1950's and began publishing for the industry in the 1970's. During his tenure as a practitioner, he personally billed over $5 million in both contingency and retainer assignments. He formed the Kimberly Organization and purchased The Fordyce Letter in 1980.


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