Benefits for Employers

• One benefit for an employer to using an uncapped commission plan is that by not limiting a salesperson's income, the company may be able to attract a highly qualified and motivated sales staff. Another benefit is that an uncapped commission plan often doesn't include a base salary --- this plan is truly pay for performance. A final benefit to a plan with no base salary and uncapped commissions is that the upfront cost for an employer is minimized: No payments are made until the salesperson produces sales.
  
  

Benefits for Salespeople

• Clearly the biggest benefit for a salesperson working with an uncapped commission plan is the ability to make as much income as possible. The better the salesperson is, the more money he can make. Because businesses often don't require salespeople to keep their hours, salespeople may have more time to spend with their families or involved in other interests if they meet their revenue goals early.
  
  

Downside for Employers

• Companies use straight uncapped commission plans primarily for two reasons. First, it requires little cash upfront. Second, business owners often believe that uncapped commission-only plans motivate salespeople more than any other factor. One danger in that thought process is that if a salesperson has a poor month, it may create stress: That salesperson may be more worried about how he's going to pay his bills that month instead of focusing on getting more sales or appointments. One other potential downside for an employer who implements an uncapped commission plan is that a productive salesperson may earn more income than the management team, which may create tension within the organization. Another downside may occur when an employer doesn't know the profit margins of its products: If it doesn't, the employer may be compensating its salespeople but not generating profits on the sale of the product or service.
  
  

Downside for Salespeople

• The ability to make as much money as possible certainly sounds appealing. However, there are a number of issues for salespeople as well. First, companies that offer uncapped commissions often either reduce or eliminate base salaries, which could mean that slow times or vacation periods translate to low income times. Second, because commissions are uncapped, companies may offer a lower commission rate on products. It's critical for salespeople to look at all aspects of a compensation plan before making a decision --- not necessarily just jump at uncapped commission plans.