Boss asking for thoughts on a new commission , no idea!

911bill

I agree with you. This furlough situation has been a wake up call. 

I don’t plan to remain with the company for too many more years, it has already been 15 but I just want to ensure I don’t walk away from this meeting with less p/a. That is all I am concerned about, nor do I want to be knocked down and have to work even hard just to maintain the 70, that would effectively be a pay cut. 

Dividends was floated by the technical director to me many years back, he isn’t the managing director of whom I am having this meeting with but does share a large portion of the business With the MD. I would certainly have more interest in maintaining and pushing sales if I were to receive dividends.. 

I believe the directors pay themselves a minimal amount to avoid tax or at least avoid larger tax rates and then pay a lump to themselves. I’m not sure if that is a feasible suggestion to my MD..

thank you again for your posts, I know in the car sales world it can be common place but I don’t think the majority earn 48k’s worth, a few cases maybe. I’m in IT software but never discussed with others in the industry. 

ACG

Could you take the job of working it out away from him? 
If he just picks a few at random to check you have given him the correct figures, that will save him time? 

911bill

ACG said:

Could you take the job of working it out away from him? 
If he just picks a few at random to check you have given him the correct figures, that will save him time? 

Great suggestion, I do it for myself so that I know what is coming. 

We recently moved to Xero, I would be VERY surprised if that doesn’t have it worked out already. 

I will suggest that however, thank you.

your posts are really helping, I tend to go blank in situations like this so I am making notes. 

I do like the idea of a higher basic, lower commission but I am yet to work out here that works long term. 

My company are certainly slack with regard to pay rises, reviews and so on, even when asked, it sort of gets brushed to one side. More the fault of the tech director as he is the go to guy as he is most active and present. 

Aside from doing the commissions for him, which I don’t think he will go for, I just can’t see what options I can think of to escape his 6 hour calculation. 

If he removes commission and pays £70k but opens up dividends for future sales, is that another feasible suggestion? 

I just feel like he has put this on to me to set me up as I feel he is that kind of guy, as I said, he is shrude so I really need to have my notes polished when I see him. 

Super_Whiskey

It looks like you bring in about £480k of income for the company based on 10% commission so what about this:

A lower commission for the annual maintenance which I assume doesn't take up too much of your time which you need to keep ticking over say 5-8%.

Monthly items appear to be slightly more valuable to the company so worth more of your time so you may want to attach a slightly higher % to them, maybe 12-15%.

Upfront items with an annual maintenance charge appear to be the big earners both for you and the company (cashflow and repeat income) so say 15-20%.

Basically, the structure should be geared towards what the company values most. Without knowing more about the company and its products, it's hard to give more specific advice. You'd also need to play around with the numbers to see what works for you. Eg higher basicbut commission only on the upfront items?

EDIT: You shouldn't really be responsible for setting your own pay structure but the company appears to value your input but make sure you're not screwing yourself over in any way!

911bill

I like that, noted. That could work although I do wonder if that means more work for him.

As for an update.

I received an email this morning saying “I am disappointed that I have not received an email from you with your thoughts, so I will cancel today’s meeting.” 

I already had my notes typed so I just sent those over to him, they pretty much consisted of everything from this post. I was just waiting for him to come into the office, whenever that was meant to be today and have a chat about it all. 

I feel a bit between a rock and a hard place and yes, he did ask me to email him my thoughts but at the same time, I wasn’t sure if that was a bit like showing someone your cards in a poker game. He’s a smart man, I’m sure he knows what he wants to do but I just think he wants me to give him a way out which works better for him. 

Annoyed! 

911bill

This was my rough email to him in a hasty reply. 

Quite hard to think of an alternative commission scheme without increasing the time it takes you already.

 

Below are just notes of ideas after speaking to some friends and looking into alternative methods out there.

 

 

Currently 30:70, never a problem until furlough/mortgage app.

Tax rates = £12,500 --> 20% Basic rate --> £50,000 -> 40%!

Higher basic, lower commission. What basic? Lower commission, steeper climb to increase in future. 10% already low. 

Staggered commission rate per item? A lot more calculation.

Upfront = 15%
Monthly = 12%
Maint = 8%

 

No Commission, higher basic and dividends? Depends on basic. Increased, vested interest.

 

 

All a bit rough but quite hard to know where to go as current scheme does work but I noted the time you mentioned to calculate commission and other options would seem to add to that.

 

Thanks,

Roger.Wilco

Manxman_in_exile said:

... is it quite common for people who receive commission on sales to have a 30:70 split between basic pay and commission?  If I became accustomed to earning £70k pa, I think I'd be a bit anxious if £48k of that was commission.

Depends upon the industry and company and country - but is not uncommon.

In my industry - (I have heard rumors - as pay is never publicly discussed) - that some of the Account Team when landing a multi-million £ project will get a "winning bonus" of hundreds of thousands £.  If your in that role - you understand that some years will be lean - other years will be nirvana. People in those roles are usually very mercenary - and will jump to other projects/ companies as soon as they work out that the chance of success is unfavorable.

I personally many years ago - was asked by a prospective employer (a tech start-up) - if I'd accept something like a 10:90!  Basically a v.low stipend as a base with pure profit share for the first few years.  This is quite common the tech sector and in places like Silicon Valley.

I also know of a company that remunerates via a 33:33:33 policy - where 33% is the base - 33% is personal performance & commission and 33% is overall company performance.  What it means is that you have to keep on-top of your tax as every year the total is different and you might be due a sizable tax refund (or alternatively, have to pay HMRC a sizable amount).

Financial institutions usually won't take the bonuses/performance/commissions into account - so it may also affect you that way as well.  But such a scheme can double or triple your take-home.  Though, if you live beyond your means - then like in any other remuneration scheme your asking for trouble.

jonnygee2

It's definitely common, people in my company are on minimum wage and earning six figures. Most of them are pretty young too, so it works out well for them if they are good at it.

I'm starting to see the OPs problem is that they've been tasked with finding an easier to calculate system than a flat rate, which is already the most simple system possible :-D .