What is incentive compensation?
Incentive compensation is a form of flexible compensation, in which how much an employee earns varies depending on how many sales they make and how this benefits the company as a whole. Through incentive compensation, the goals of individual salespeople and the goals of the company are aligned, resulting in improved business outcomes.
Incentives can vary from business to business and can include bonuses, commissions, SPIFs (Sales Performance Incentive Funds), prizes and recognition of employees’ achievements. A successful incentive compensation plan is structured in such a way that employees’ rewards will increase as they make more sales and raise revenue for the business.
The benefits of incentive compensation
- Increase in sales
The goal of incentive compensation is to motivate employees to work harder to meet and, hopefully, surpass their sales goals, therefore boosting company profits. Salespeople are financially motivated, so the prospect of compensation based on improved performance is guaranteed to result in more sales.
- Positive working relationships
The success of incentive compensation is based on employees and employers working as a team to drive the business towards success. Some businesses also organise their salespeople into teams to work towards a common goal, fostering positive working relationships between colleagues and encouraging them to help each other.
- Reduction in turnover
If an employee feels dissatisfied with their work and feels as though they aren’t being recognised or rewarded for their achievements, they are likely to move on to another job that more befits their personal goals. Employee satisfaction depends largely on whether their hard work is adequately rewarded, and incentive compensation is the perfect way to achieve this.
How can sales compensation software help?
Sales compensation software simplifies the compensation process, improving automation and providing transparency for you and your employees so you can work together to boost your business’s profits. Get in touch with Commissionly today and find out how we can streamline your sales compensation plan.