Commissions boost performance, but only if employees trust they'll get paid right

Incentive-based pay can drive job performance and employee satisfaction – if workers are confident in how their employer administers compensation.

“Incentive compensation can clearly be a powerful lever for job satisfaction and performance,” said Mark Schopmeyer, cofounder and co-CEO of CaptivateIQ. “However, with incentive compensation often being the largest go-to-market expense, we would ideally see that 100% of the commissionable workforce is motivated by incentives.”

CaptivateIQ, which provides incentive compensation management solutions, released its Compensation & Motivation Pulse Survey exploring how commission-based pay affects employee motivation and performance. Among the findings:

• Fifty-seven percent of respondents said working for commissions or bonuses motivates them to do a better job at work, and more than half said it motivates them to hit their goals. Furthermore, 44% of respondents said it improves job satisfaction, and 43% said it makes them feel more engaged at work.
• When asked what improves their motivation at work, 59% of respondents said having confidence that commissions are calculated accurately; 53% said timely commission payouts; and almost half said visibility into payout calculations and potential earnings.
• Employees’ ideal pay structure is a combination of commission and salary, according to 61% of respondents. This further highlights how variable compensation can be a driver for improved revenue performance, especially if incentives are closely aligned with company goals.

However, these results depend in large part on worker confidence in their employer.

“Digging deeper into the survey, we found that lack of trust is a major detractor in the effectiveness of incentive compensation programs,” Schopmeyer said.

• Fewer than half of respondents are completely confident that their commission payout is always accurate, and 55% have questions at most or every pay period about how their payout was calculated. A vast majority said they manually recalculate commissions at least some of the time to confirm payout accuracy, taking valuable time away from more lucrative revenue-generating activities.
• Forty-five percent of respondents said delayed commission payouts would negatively affect job motivation, and 41% said a lack of visibility into how payouts are calculated would do the same.
• Forty-four percent of respondents said they have been paid late for a commission or bonus, and 34% said they have been underpaid. One-third said they have been unclear about what a commission payout should be, and nearly 1 in 4 said they were not paid a commission or bonus when they thought they should be.

Related: Using financial incentives boosts wellness programs, study finds

“The bottom line is that organizations can’t just set and forget commission plans,” Schopmeyer said. “Enablement, clear communication and transparency are key. The best incentive programs are strategic in nature, inspiring the right go-to-market behaviors at the right time to derive the best possible outcomes for both the employee and the business.”