Q:  I have a small business and need to hire a sales person.  However I can’t afford to pay someone much.  Is it possible to pay an employee only on commission?

A:  It depends. The employee must be an outside salesperson (as opposed to inside sales) and must meet other wage-and-hour criteria in order to be exempt from minimum wage and overtime. Alternatively, you could also hire someone as a commission-only independent contractor.  Note: If you go this route familiarize yourself with your responsibilities as the state of Florida has additional requirements.

But like I’ve said here many times before, just because something is legally possible doesn’t mean it’s good practice or good for your business.  Here’s why:

Put yourself in the shoes of the salesperson who would be taking a job for no pay unless they sell your product or service.  They’ll be asking:

• Do you have an excellent product or service?
• Can it be easily sold, or is this a new untested market?
• How quickly after the sale will you distribute commission?
• Will you provide a draw against commission for me to live on?
• How high is my potential compensation if I work hard and meet my sales goals?
• Does this company care about improving my sales skills?
• Do they offer training?
• Does this company inspire my loyalty?

Unless those questions have good answers, then you may not be able to attract the best sales people and might instead attract those who are willing to take a gamble, or those who don’t have other options.  Is this who you want representing you out in the field?

I’m not saying that commissions-only situations are always bad.  I’ve seen good sales reps make lots of money, for themselves and their company under commissions-only plans.  However, these were situations where the company treated them like any other employee:  offered them benefits, invested in their professional development and included them in the company culture.

As a small business owner you may not have as much to offer in benefits and professional development but, you can certainly offer sharing a great culture.   So your best option may be to offer minimum wage ($322/wk), great culture and passion, plus commission.

© Copyright Eva Del Rio

Eva Del Rio is a human resources consultant, columnist and creator of HR Box – tools for small businesses under 49 employees. Send questions to Eva@evadelrio.com