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Pros and cons of a commission-based remuneration system

Different enterprises use different employee remuneration systems. This depends on a number of factors, such as company policy for instance. The systems differ from one another, each of them having positive and negative aspects.

A commission-based system is one of the possible remuneration systems. In this case, the employee’s salary depends on his or her individual achievements. The remuneration may be a per cent of the sales value or may depend on plan completion. The employee is paid for carrying out a task only if he or she achieves the goals set or at least some of them. Such a remuneration may be paid to the employees monthly or with respect to longer periods of time. However, one needs to remember that the commission-based remuneration system may be used only if the employee’s (recalculated) salary per month is not lower than the national minimum salary. Otherwise, it will be against the law.

This system, like every other system, has its pros and cons. One of the major benefits for the employer is that the remuneration corresponds to the actual, measurable results achieved by the employee. The drawback for the employee is that he or she is unsure of his or her remuneration, as it may change every month. On the other hand, though, employees that perform better than their colleagues are better paid, which may effectively motivate the rest of the group to work harder. Apart from that, the commission-based system motivates to act and allows for achieving objectives and carrying out tasks. This kind of remuneration also makes it possible to substantially reduce company costs, as the results achieved mean benefits for the entire enterprise. The Motiveo system may be useful in calculating remunerations in the commission-based system. It allows for clearly defining bonuses depending on the sales volume and provides access to reports on the completed sales. Thanks to that, you can always check what remuneration is to be paid to which employee and see to what extent he or she carried out the plan. The employee is also able monitor the progress of his or her work and plan the actions so as to maximise remuneration.

Motivation to act is a big plus of this system. However, it’s an incentive for individual actions. When deciding to use the commission-based remuneration system, you need to be aware that the employees may become reluctant to work in a group, since everyone is competing for the best remuneration for himself or herself. This poses a substantial threat of an unhealthy atmosphere at the office and problems in group communication. Furthermore, many people are afraid of the commission-based remuneration system because they fear an unstable market and the impossibility of carrying out the plan. It is also quite obvious that in order to achieve the desired remuneration, the employee needs to be properly experienced. However, even though the beginnings may be difficult, this system may generate huge financial benefits both to the enterprise and its employees.