Guide to Commission Only Jobs

Guide to Commission Only Jobs

I, Sally, leant something new when researching this article, in reality there is no such thing as a commission only job; you can’t work for hours and hours and get paid nothing. Of course there maybe a contractual way around this? Please leave your comments and share your experiences at the bottom of this article, if you are an employer on a commision only basis or you work on a commision only basis or you have been offered commision only work. 

What are commission-only jobs?

As the name suggests, commission-only jobs are positions where your only earnings will be the commission on any sales that you make. That is, rather than being paid a fixed wage – for instance, a rate of £10 per hour – you will be paid a small proportion of the value of the sales you make.

Economic uncertainty may encourage an employer to take on new workers on a commission-only basis. This means that they won’t have to pay out any wages without getting any return on their investments, though whether or not such a set-up is the right thing for you depends on your individual circumstances. 

Are they legal?

For starters, if you are employed on a fixed salary or even on a fixed hourly rate, your employer cannot switch this to commission only pay without your explicit written consent.

Aside from that, commission-only jobs are perfectly legal, so long as employers respect National Minimum Wage legislation. Under the current rules, this type of work is known as “output work”, with employers legally obliged to ensure you receive at least the Minimum Wage for every hour you work.

In many cases, however, an employer may ask you to agree to a “fair estimate” of the hours you have worked. So, for example, if you spend 40 hours a week making cold calls and a further 10 hours researching leads, you may only be paid for those 40 hours. Additionally, note that an employer may use your commission to make up your pay to the legal minimum.

 

Advantages of commission-only jobs

  • High earning potential

If you’re looking for sales-related work, the chances are you’re not lacking in confidence. And if you genuinely are a great salesperson, then working on commission alone can ensure you earn far more than you might expect in a standard salaried role.

For instance, some companies offer substantial rewards if you hit your OTE (On Target Expectancy) goals, meaning your salary can be upwards of £50,000 – indeed, earnings in excess of £100,000 a year are not unheard of for salespeople working on commission in top-end sectors such as luxury car retail.

 

  • The chance to be your own boss

In commission-only jobs, the emphasis is usually on letting sales staff get on with their jobs with minimal interference. So long as you hit your targets and bring in money for your employer, they will be happy to leave you alone.

As such, this type of sales job could be ideal for you if you thrive working on your own rather than as part of a close team or with close supervision.

 

  • Flexibility

One other potential advantage of commission-only jobs is that they tend to offer greater flexibility than standard waged positions.

That is, just as an employer can – and probably will – let you go with just a few days’ notice should you fail to hit your targets, so too will you be able to walk away should you feel the job is not for you.

In most cases, employers will be happy for you to see out the remainder of the working week, with very few requiring a full month’s notice.

 

Possible downsides of commission-only jobs

  • Low earning potential

The main downside to this type of work is, of course, the very real possibility that you will not make many sales, or even if you do hit your targets, the commission you earn will be so low you’ll only be earning the equivalent of the National Minimum Wage.

While low rates of commission should be made clear from the start, some employers are much less scrupulous than others and may insert some technical small-print into your terms and conditions, meaning you only get paid a fraction of what you were expecting.

Additionally, it’s worth being aware from the start that you are more likely to earn commission selling certain things than others.

 

  • Tax and overheads

Many employers take on sales staff as ‘freelancers’. That is, you will be expected to invoice them for any commission you earn. If this is the set-up, then it is your responsibility to ensure you pay the right amount of tax and National Insurance.

Not only can this be stressful and time-consuming, it may also make your pay seem less attractive.

Furthermore, if a sales job requires you to travel, you may need to pay your own travel expenses, while many employers will also only include the hours you are actually selling – rather than the time spent travelling to pitches and meetings – when they are calculating your pay. 

 

  • Stress and insecurity:

Many sales people thrive in high-pressure environments, even in jobs where they know they will struggle to pay the rent if they don’t clinch a new deal. However, just as many people find this type of environment highly stressful, with such jobs often causing anxiety and a range of other mental and physical health problems.

If you’re not cut out for high-pressure sales, then a commission-only based job is unlikely to be right for you. Far better to stick to a position where you are guaranteed a fixed weekly or monthly income, even if you miss out on the chance to earn large amounts.

 

Our main summary points are:

1. Commission-only jobs are positions where your only earnings will be the commission on any sales that you make.

2. Commission-only jobs are perfectly legal, so long as employers respect National Minimum Wage legislation.

3. However, if you are employed on a fixed salary or even on a fixed hourly rate, your employer cannot switch this to commission only pay without your explicit written consent.

4. Employers are legally obliged to ensure you receive at least the Minimum Wage for every hour you work, though they can use commission as a means of making up this rate of pay.

5. If you’re a talented salesperson, they commission-only jobs can be a great way of boosting your income, provided you hit – or exceed your targets.

6. On the downside, if you don’t make many sales, your pay will be nothing more than National Minimum Wage.

7. Commission-only jobs can also be stressful, not least since they often seem to be relatively informal, meaning employers can let you go without any notice. 


 
8 comments
Mr  D Mr D
27/07/2016

Hello.
I am new starter as Commissions-only salesman in United kingdom.
I will tell you my story of what i try to achieve.
I want to connect businesses together. Businesses who would trade bulk goods or a regular basis. So i have suppliers of goods and i have bulk buyers of goods. I am willing to connect them both together so they can make money, but in exchange i want 2- 5% percentage Commission from both parties to pay me on every single item sold or bought for 1-10 years of time.
The question is what king of documentation or agreements would be needed to make this hapend if it is even possible to do so ?
As far as i know i would need to sign commission sales agreement contract with supplier for 5% commission for every item sold.
And i need to sign Finders fee Agreement with the buyers company. Please get back to me if anyone knows about this as i am new in the game and don't know the laws and politics, documentations.
Thanks

 
Patrick Patrick
25/07/2016

The idea that working as a direct sales rep you get minimum wage come what may is a big shock to me !! 25 years in various roles including senior management ive done 100 hours for less than minimum several times. to enter sales you need to believe that youre going to make it. On a good week you'll earn big and kid yourself for the following three so mentally you have to be strong...If a position says ote then challenge it strenuously at interview.

 
Patrick Patrick
25/07/2016

The idea that working as a direct sales rep you get minimum wage come what may is a big shock to me !! 25 years in various roles including senior management ive done 100 hours for less than minimum several times. to enter sales you need to believe that youre going to make it. On a good week you'll earn big and kid yourself for the following three so mentally you have to be strong...If a position says ote then challenge it strenuously at interview.

 
Paul Paul
01/05/2016

I worked in 'direct sales' and wish this status was investigated closely and eradicated. it is not investigated by the DWP who have responsibility for how people work in this country. it should be eradicated as it is just a tool for people to be exploited.
Direct sales can be a great measuring tool as to personality and ability, but, it can also lead to serious financial troubles and mental health issues. Personally speaking, it just is not worth it no matter how well a or, the, position has been hyped up.

 
Dave Dave
25/03/2016

The definition of "job" needs to be better legally defined. Many commission only salespeople are self-employed, so technically the job they applied to doesn't exist and they are running a small affiliate marketing business. Often there is a pyramid structure involved where the company the salesperson is generating leads for is also being paid commission by a larger company or the product/service brand directly.

So many commission only job listings are misleading these days too. Many try to paint themselves as "events marketing", "promotions", "field sales" or the like, but these are different sales fields that do not traditionally work on commission.

You'll often find that it is young people that have just left school, college, or university that end up doing this. Reason being that you don't need any experience and are virtually guaranteed an interview and "job" offer just for applying. It is understandable why people with no work experience would jump at the chance, but I personally think that young people should value themselves more highly.

My advice: If you're going to put work in for no guaranteed income then you are much better off starting a small business off your own back. It will look better on your CV, you will develop many more valuable skills, and the so-called "earning potential" is much higher anyway if you find you have the knack for it.

 
Mich Mich
10/02/2016

Does this work for the likes of Avon Cosmetics, as to join you have to pay a fee and you are not given minimum wage per hour you work. Time preparing brochures, which you also have to buy, time distributing and collecting brochures then time ordering, sorting and delivering goods. When this is added up it is hours, so how can you report this to Avon if they have never said, contact us with your hours to be sure you are earning above minimum wages. Could you please advise where the law is on this matter. Thanks

 
Ray Styles Ray Styles
28/10/2014

How long can one go on for trying to get sales only to be under cut by the competition. It's a deep hole being dug with very steep sides. Price we're all paying for market dumping from the far east.

 
Peter Peter
29/08/2014

This article sounds as if most commission only sales people chose not to have a basic salary. The fact is that many turn to commission only out of shear desperation as they find they are thrown on the scrap heap due to their age.

Few sales people would turn down a £20k basic plus a £20K + commission potential, plus a fully expensed company car, for a self employed sales role where they have to fund their own, insurance, NI, car and fuel before they start earning, coupled with no paid holidays.

 
 
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