How to Hire Commission Only Sales People

Posted by Sabrina Baker | Posted in Human Resources, Recruitment | Posted on 23 October 2012

Working with small businesses and start-ups I get this question a lot. “Are there people who will work for commission only?” The tactic is usually based on cash flow (or lack thereof). The business needs a sales person to secure more clients, but can not actually pay the sales person until the client is secured. Kind of sounds like a chicken or egg thing right? So their solution is to hire a commission (or the buzz word we use today: pay for performance) individual to help them out.

My answer is that there are sales individuals out there who are willing to work for commission only, but commission only does not mean completely free until the commission comes in. Let me explain.

Any sales person worth their salt is going to expect a few things up front. First, they will want their expenses paid. This may mean computer, phone, travel and meals. They do not want to wait until they get their commission for this, they will want to be reimbursed for this on a monthly basis at the very least. Second, if training time is involved before they are able to go out and sell, then they will expect some form of payment during this period. You can not expect someone to train for three months for free and then go potentially another three months before they make their first sale and get any commission. Third, depending on your business model, securing a client may not mean getting paid right away. As a recruiter, securing a client means I don’t see any real money until I’ve placed a candidate with that client which could be weeks or months down the road. The sales person is not going to care about this setup. They have closed the deal and they want their commission. Especially, if they are on a pay-for-performance only plan they are going to want to be paid as soon as the deal is closed.

So before reading any further, let me say this. If you are looking for a commission only sales person and you have zero cash flow to where you couldn’t even pay expenses – you are that sales person. Hiring someone willing to take a job without at least one of the above provisions being met means they are probably not going to do the best work for you anyway.

If you have a little cash flow and still want to pursue this path, here are some steps to take.

Understand the difference between employee and contractor. There are laws about whether a person is an employee or an independent contractor. Here is a thorough description of the difference and a few questions to ask yourself. If this is a short term-project base type position, chances are good it falls into an independent contractor relationship.

Look for someone with experience. Good sales people will tell you they can sell anything and while that may be true, you don’t have a ton of time to get them up to speed. Looking for someone with experience in your exact market is more important here than with other positions.

Give them something to be vested in. Lets be honest. If you aren’t paying them until they make a commission and you aren’t giving them a ton of other perks along the way, what real interest should they have in selling your product? They may just be taking this “job” to have something on their resume until they find something that will actually pay them. Consider a draw or something that gives them enough to see long term opportunities with you. There are people who love working with start-ups or small businesses, but they need something to keep them motivated.

While I don’t advocate the commission only model, it can be done. I have fellow business owners in my network who have commission only people working for them and it seems to be working. It does take effort to find the right person who is willing to be invested and stay with you until your client base grows. Be careful not to just bring someone on board who is only doing this until something better comes along as they could damage your brand before you ever really get started.



Photo: Vintage Creekside

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Sabrina Baker

Sabrina is the CEO and founder of Acacia HR Solutions. After spending 11 years in HR Generalist/Recruiting roles in corporate America, Sabrina experienced a layoff in 2010. During her time as a job seeker she realized that she had an advantage over many other job seekers because of her knowledge on the "other side". She also realized that job seekers do not have it easy these days and wanted a way to help. In 2011, Sabrina started the company as a way to continue her HR and Recruiting practice, but also help job seekers which had become a passion project for her. The company was built on the premise that everyone could find meaningful work. Sabrina serves as a consultant to companies in order to help them create meaningful work environments for their employees and as a mentor and coach to job seekers in their efforts to find meaningful work for themselves.

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11 Responses to “How to Hire Commission Only Sales People”

  1. Don Williams says:

    As an employee working for straight commission, what are my rights; vis-a-vis, mandatory attendance at company sponsored networking events, sales meetings, office hours, from where I work (comapny office or home office)? Do I have any power to choose these things? With no salary, it seems to me I would be able to decide many of these things for myself.

    Thanks in advance for your response.

    • Sabrina says:

      Don,
      It depends on the agreement you have with the company. If you are a contractor on a 1099 basis then yes you could decide whether company events etc are mandatory. If you are an employee on a W-2 basis then they have more ability to mandate things. Depends on how you are set up…

  2. Juve says:

    Can you be working in another job, and be employed as a Commission-only agent??

    • Sabrina says:

      I would guess that unless the commission only job is a direct competitor and you haven’t signed anything with your current employer saying you will not take additional jobs then yes you could.

  3. Juve says:

    Can you be working in another job, and be employed as a Commission-only real estate agent??

  4. Algernon says:

    I’m looking at hiring a commission only person. What paperwork do I need in order to do that. Thank you.

    • Sabrina says:

      The paperwork depends on how you are hiring them. I assume they are a contractor so you would need to follow the rules for hiring contractors. You would definitely want a contract that outlines how they will be paid, when and their roles and responsibilities.

  5. Bernard says:

    I’m opening an investment firm.
    Does this apply in my line of work?

    • Sabrina says:

      Bernard,
      You could certainly hire commission only sales in that line of work in certain roles. Obviously the individuals handling investments or actual money for your firm would need to be employees. Since I wrote this article legislation has been introduced intended to tighten the fines and penalties for incorrectly classifying workers.

  6. Bill says:

    I am a owner and I’m wanting someone on the W2 side of the Commission only what paperwork is different than my Hr employees?

    • Sabrina says:

      The paperwork is no different, however, since they are an actual W-2 employee you are governed by FLSA laws. If they can be considered exempt then you do not have to worry about minimum wage, but if their job duties do not qualify for exemption and they are considered non-exempt, you would need to ensure they at least make the minimum wage as governed by your state. I would talk to your HR staff or legal counsel and explain the job duties so they could help you understand how to hire this person on and ensure compliance with FLSA.

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