ABSTRACT
This chapter provides an overview of key issues related to compensating salespeople. The core of sales compensation plans consists of a salary and incentive payments. The primary methods of compensating salespeople are straight salary, straight commission, and a combination of base salary plus incentive pay in the form of commissions, bonuses, or both. Compensation plans that offer a base salary plus some proportion of incentive pay are the most popular because they have many of the advantages but avoid most of the limitations of both straight salary and straight commission plans. In determining the most effective form of financial compensation, the firm must decide whether it should use straight salary, straight commission, or a combination of base salary and incentive pay such as commissions, bonuses, or both. To be effective, the incentive pay portion of the combination plan has to be large enough to generate the necessary interest among salespeople.
