Bonus packages feature quite strongly in our day to day conversations with clients and candidates about sales jobs, as you might expect for a niche recruiter like us. It’s a subject we’ve written about in the past, in the context of evaluating job offers and the split between bonus and basic salary (read the fully updated version of our popular blog Bonus v Basic).
In this article, we want to explain the fundamentals of bonuses for sales roles. To do this, we’re looking at it from the perspective of both the employer and the candidate.
The obvious answer to this question is that employers want to incentivise their sales teams. Bonuses are generally linked to individual and departmental targets, which usually feed into a wider business development strategy.
Increasingly, bonuses are also linked to other performance related criteria (KPIs). These can include things like number of calls made, speed of progressing customers through the sales cycle, knowledge sharing and personal development objectives.
In the jobs market, a well thought out bonus strategy can help to attract top salespeople with sought after skills and experience, which can then be a powerful catalyst to company growth.
First and foremost, employers want to see results. Their task is to set a target that is ambitious enough to achieve their wider business sales goals but not so high that it is unachievable.
To cap or not to cap?
When it comes to rewarding those who achieve their targets and KPIs, there is a temptation for employers to try and cap earning potential. This is understandable from a business perspective, as it helps budgeting but most employers understand that doing this not only disincentivises talented salespeople, it also limits new business growth.
Rather than capping bonus payments, some employers choose to pay a relatively small amount for hitting 90 to 100% of target, followed by significantly larger payments for sales achieved over target. This is often an option chosen by companies that are on a fast growth trajectory, where new business development and increased market share are key elements of their strategy.
Companies often like to have a team and company element to the target as a way of incentivising the sales team to work together. It is worth remembering, however, that most sales people prefer individual targets so that they don’t have to rely on others for their income boost.
Clarity is another important factor for employers to consider. Salespeople perform best when they understand exactly what they are expected to do to earn their bonus and what they are being assessed on. Some employers might pay bonuses on invoiced sales only and others might pay on profit rather than sales volume. These are reasonable parameters, as long as they are clearly communicated.
In general, the best bonus systems from the candidate's point of view are those that are paid monthly and are uncapped. Some salespeople tell us that bonus caps encourage them to hold back, even when opportunities for new business arise. Regular monthly payments motivate them to perform consistently and mean that they are always focused on achieving target, compared to annual or quarterly bonuses.
Candidates in the commercial heating, ventilation, air conditioning (cooling) and BMS sales markets tend to be looking for an extra £20K - £25K for high performance on top of their basic salary. They also prefer their bonus to be paid monthly.
Last and definitely not least, candidates want to know that targets will not change massively year on year. It can be demoralising to work hard to reach an ambitious target, only for the goalposts to be moved the following year. From the candidate’s perspective, they can feel punished for working hard by having the carrot moved further away. This is a big factor in the decision by good salespeople to move on and find another job.
The points we have covered here are general and every employer and salesperson will have their own priorities. The best bonus packages are those that balance the demands of the employer with the preferences of the candidate. However, it is always good practice to maintain a regular conversation between employer and employee about bonuses and targets. Companies often develop their bonus packages in collaboration with their sales teams to make sure they find a scheme that motivates and retains staff whilst also achieving the objectives of the business. Even if the scheme is already in place, it should be reviewed regularly to make sure it is as effective as it can be.
For tailored advice on finding the best sales job and package for your next career move, contact Thornhvac on 0115 8714 777 or email firstname.lastname@example.org. You may also want to check out our latest sales vacancies: