Sarah covers five rules for commission pay: define what counts as a sale upfront, enforce thresholds like a $5,000 monthly minimum without exceptions, pay on a fixed schedule (biweekly by 10 a.m. on the 15th), budget commission separately and don't spend it on overhead, and track employee progress toward goals.
Hey, guys, it's Sarah with the Boutique Hub. And I'm back today to answer again one of our frequently asked questions. And it is about paying staff on commission. Is it a good thing? Is it a bad thing? What do we think? Well, I'm not going to say it's good or bad. It can work depending on who you're dealing with and what the situation. But there are a few things that it's really important that you identify at the very beginning before you just say, yeah, we'll pay you on commission. One, how are you going to do it? Think this all the way through. Think it through from the logistics side, think it through the budgeting side. When will you pay them out? How will you analyze it? How will you record it? You know, how. How are they going to input the sales so that you can figure out who gets paid? What are you paying commission on? Absolutely every sale split sales. When you have more than one employee working with a customer, how do you manage that? Make sure all of your rules are lined out very concrete, right? Explain this to your staff. And this would be something you could do in a staff huddle, a team meeting. Make sure they understand completely. The next thing is make sure once you identify these rules that they are concrete, that you don't sway back and forth on them or give somebody a little bit more leeway than somebody else. One of my perfect examples of this is say you make a sales goal of $5,000 a month. If you reach that $5,000 a month, we will pay you commission on those sales. Anything under 5,000, we do not. Well, what happens when somebody comes in and they reach $4,997 for the month? Do you pay on commission? My advice is no. My advice is a strong no. Because if you waiver on the $3, next thing you know, you'll waiver on the $10, and next month you waiver on the $50. A rule is a rule. Put that in place. Make sure everybody completely understands that. That gives you something to hang your hat on, something as a baseline, something to just say, nope, this is the rule. That was one more upsell of a pair of earrings that you could have sold that would have earned you the commission on the entire $5,000. So if you set rules, just make sure you follow them. No bending. No bending. All right? The next thing is be consistent in your payout. If you say you are going to be paying that commission out with their. Their biweekly paycheck makes sure it happens. The reason I bring this up is A lot of times figuring out that commission can be a bit more of a headache. It can be a little bit more math involved, right? Sometimes if you're not used to it, I'm not gonna lie, sometimes you'll forget it. But you know who doesn't forget it? Your sales staff. They do not forget it. So make sure you implement a plan, run that through, maybe even talk to your accountant. Because the one other thing that's really important is you want to know how commission affects your bottom line. But the employee, they need to know how it affects them tax wise as well. So very important that before payroll is due by 10 o' clock on that day, the 15th of the month, that you understand how are you processing those commissions or those bonuses. These are conversations that I highly encourage you to have with your accountant or your bookkeeper. And the last thing, the last thing is make sure you are acknowledging these things. Make sure you are understanding that they how important commission is to your staff. If they're motivated by money, make sure you're acknowledging along the way where they are at, how they're attaining these goals, how they are attaining these goals as a team. Because either you are paying these out individually commission or maybe you are paying it out as a team, neither or either way, it's important to acknowledge these things. People like measurable goals. One step further, that is your budgeting. Are you going to pay a bulk amount or are you paying a percentage? Nonetheless, make sure you budget for this as that money is coming in. Understand, if you're paying back a portion in commission, that not all of that money coming in is yours. Granted, we all know a number of that has to go back to taxes, credit card processing fees, maybe shopify fees. But if you've already allocated a percentage of your sales to go back to your staff as employee commissions or bonuses, do not spend that money on inventory or some other overhead expense because when it's time to make payroll and you have to find that money, you have to find that money. All right guys, that's just a little bit on paying your staff on commissions or bonuses. I'm not saying it's a bad thing. I'm just asking you to do your homework. Have a plan in place before you get started. Alright guys, if you like this video and you want to see more from the Hub comment below, let us know what else we can talk about and answer questions for you. I appreciate your emails, your Facebook messages. Again, this is Sarah with the Boutique Hub and we'll be back next time.
