PLEASE HELP!! advantages and disadvantages of hourly wage plus commission

Pro: Rewards Performance

A primary reason companies use straight commission or a plus commission pay plan is to motivate employees toward better results and to reward high performers. If you pay salesmen a straight salary, some may have limited motivation to exceed basic expectations. However, by adding commission-earning opportunity, companies drive salesmen to set more aggressive goals, to work through obstacles and rejection, and to continue to prospect and seek new selling opportunities.

Pro: Only Pay When You're Making Money

Especially for a small business, the ability to pay expenses only when you're making money is a massive boon. If you paid your sales people a fixed salary, then that salary is a fixed overhead. You have to pay it, even if you're not making any sales. Structuring the compensation as a commission means the expense comes out of your top-line revenue. No sale, no payment. It's that simple.

Pro (or Con): Stability

Thought a straight salary offers the most stable income for employees, sales employees who have worked on straight commission often appreciate a higher level of guaranteed income and base pay. The balance of stability and incentive to perform at a higher level has a nice balance of benefits from both straight salary and straight commission. The key is to offer just enough stability that employees feel satisfied with their basic financial security but still have motivation to sell more to earn more.

Con: Complexity

Salary plus commission is more difficult to administer than a pay structure with one basic type of pay. With this pay structure, payroll staff must manage both the salary and commission aspects of pay. Additionally, salesmen can become confused about how their pay is calculated, especially if more than one type of commission is offered. Some companies offer multiple commission percentages for multiple product and service categories, as opposed to one commission rate across the board.

Con: Limited Impact

Salary plus commission critics most often point to challenges in execution, not the ideas behind motivating employees with commission. Some companies use relatively small commissions as small add-ons to standard salary or wages. This can make the commission portion of pay a token gesture that adds to the company's payroll expenses without truly incentivizing employees to sell more. In a worst-case scenario, salesmen see the commission as a slap in the face and become bitter toward the employer.

Explanation:

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