The difference is that the “commission” is communicated as a “piece of the action,” whereas a “bonus” is a fixed incentive amount offered for achieving a specific objective. Commissions and bonuses both have their place in sales compensation plans – but knowing when to use which one can be a bit tricky.
Paying commissions only when the customer has paid – this may not work any more in some states. Illinois and Maryland have awarded commissions to terminated employees for sales that were booked before they left, but for which payment from the customer had not been received.
While many established sales organizations use the hunter-farmer model as their sales force organization model, there are inevitably geographic territories or customer segments that do not justify both “hunters” and “farmers’…
California, a state already ahead of most in regulating calculation and payment of sales commissions, has put into law the requirement to document commission plans in writing effective January 1, 2013.