1. Fixed Commission
A fixed commission structure is straightforward and easy to calculate. Your sales team will know exactly how they are getting paid with each sale and it will add little complication to your accounting.
Fixed commission pay can come as a lump sum from each sale or as a set percentage of each sale. Lump, flat-rate payments are typically best for high-margin product lines like luxury goods or car dealerships. Percentage-based fixed commissions are more commonly used for retailers who sell a variety of products with a wide range of pricing and margins.
While fixed commission is the simplest pay structure, it can result in some of your products losing their profitability. While you must focus on rewarding and compensating your employees fairly (especially your best ones), it cannot result in the sale becoming a net loss for your business. Be careful to measure the exact profitability of each item prior to promising a fixed rate of commission on its sale to your staff.
This structure can also be used intermittently in your retail store. A fixed commission is a great motivator for sales. If you are overstocked on inventory (remember, the longer an item takes up space on your shelf, the less its value becomes) or anticipate a future excess during holiday seasons, add an extra incentive for your sales team to push that particular product with a fixed commission.
And remember, a commission can come in a variety of forms; this doesn’t have to strictly mean cash. Instead, you might want to offer prizes, trips, or extra vacation if your cash flow isn’t where you’d like it to be.