Commission vs salaried sales team pros and cons
Commission-only pay is cheapest per sale when your lead flow is thin, a salary is cheapest per sale once a rep reliably closes more than their monthly salary divided by your commission rate, and base plus commission sits in between while sharing the risk. In the worked example below, a closer on a 10% commission costs the same as a $6,000 monthly salary at exactly 12 closes of a $5,000 offer. In Australia and the US, the legal side matters as much as the maths: most employees cannot be paid commission-only, and calling someone a contractor does not make them one.
Commission vs salaried sales team: the short answer for business owners
If you’re asking “should I pay my sales team commission or salary?”, start with three questions. How predictable is your lead flow? How much control do you need over hours and methods? And is the rep legally an employee or a genuine contractor? The third answer often decides the first two.
Most established sales teams land on a mix. The US Bureau of Labor Statistics notes that for wholesale and manufacturing sales reps, most employers use a combination of salary and commissions or salary plus bonuses. Pure commission is common in remote high-ticket sales, but it has real trade-offs.
The criteria that should decide how you pay your sales team
- Lead volume and consistency. If the calendar is full every week, a salary is cheaper per sale. If leads come in bursts, commission keeps your cost tied to results.
- Control. Set hours, scripts, your CRM, your training and a manager watching call recordings all point towards employment.
- Sales cycle length. A 90-day B2B cycle on commission-only means your rep goes months without income. Good reps won’t stay for that.
- Cash flow. Salary is a fixed cost you pay in a bad month. Commission is a variable cost you pay only after the sale.
- Who you want to attract. Commission-only attracts confident closers and, frankly, plenty who last three weeks. A base attracts skilled reps who need stability.
Commission-only vs base plus commission vs salary: comparison table
| Factor | Commission-only | Base plus commission | Salary (with or without bonus) |
|---|---|---|---|
| Your fixed cost | None | The base | The full salary |
| Who carries the risk of a slow month | The rep | Shared | You |
| Control over hours and methods | Low if they are a genuine contractor | High (usually an employee) | High (employee) |
| Typical worker status | Contractor, or employee only where allowed | Employee | Employee |
| AU super on commission | Yes for employees, and for some contractors | Yes, 12% including commission | Yes, 12% |
| Rep turnover risk | Highest | Medium | Lowest, but weaker push to close |
| Best when | Lead flow is uneven and offers are high ticket | You want both control and motivation | Lead flow is steady and the job includes non-sales work |
The crossover rule: a worked calculation
The crossover rule: monthly salary divided by commission rate equals the monthly revenue at which a salaried rep becomes cheaper per sale than a commission-only rep. Below that line, commission is cheaper. Above it, salary is.
All numbers below are illustrative assumptions, not benchmarks. Swap in your own.
- Offer price: $5,000 (paid in full)
- Show rate: 70% of booked calls turn up (see how show rate works)
- Close rate: 20% of calls that show
- Commission-only: 10% of cash collected
- Base plus commission: $4,000 monthly base plus 5%
- Salary: $6,000 monthly ($72,000 a year), no bonus
| Booked calls in the month | Closes (calls x 70% x 20%) | Revenue | Commission-only cost | Base plus commission cost | Salary cost |
|---|---|---|---|---|---|
| 50 | 7 | $35,000 | $3,500 ($500 per sale) | $5,750 ($821 per sale) | $6,000 ($857 per sale) |
| 100 | 14 | $70,000 | $7,000 ($500 per sale) | $7,500 ($536 per sale) | $6,000 ($429 per sale) |
The crossovers in this example: salary beats commission-only above $60,000 revenue ($6,000 divided by 10%, or 12 closes). Salary beats base plus commission above $40,000 (8 closes). Base plus commission beats commission-only above $80,000 (16 closes). In Australia, add 12% compulsory super on top of each employee figure, commission included.
The number the spreadsheet hides: at 50 booked calls, your commission-only closer takes home $3,500 for a full month of calls. That is why commission-only teams churn, and every rehire costs you again. For how rates are usually set, read high-ticket closer commission explained.
Hiring closers or setters for your business? Book a free call with the She Sells team to talk through your pay plan and hiring.
Is it legal to pay a sales team commission only? AU and US side by side
This is general information, not legal advice. Check your award, agreement or state law, or speak to an employment lawyer, before you write a contract.
| Question | Australia | United States |
|---|---|---|
| Can an employee be paid commission-only? | Only when an award or enterprise agreement says so. Award and agreement free employees can earn commission but must still get at least the National Minimum Wage. | A non-exempt employee must still reach at least minimum wage each workweek. The outside sales exemption does not cover phone or internet sales. |
| Contractor or employee? | Calling an employee a contractor without reasonably believing it is sham contracting. | The IRS looks at behavioural control, financial control and the type of relationship. |
| Retirement or payroll costs | 12% super on all commissions paid to employees from 1 July 2026, and some contractors count too. | Employers withhold and pay payroll taxes for W-2 employees, generally not for genuine 1099 contractors. |
Australia: Fair Work, sham contracting and super
The Fair Work Ombudsman says an employee can be paid commission-only when an award or enterprise agreement states that an employee can be paid this way. If neither allows it, commission goes on top of at least the minimum rate. Contractors are a separate category, but only if they really are contractors. Fair Work lists maximum sham contracting penalties of $21,840 for individuals and up to $546,000 per contravention for larger businesses. A closer on your rostered hours and your script looks a lot like an employee.
On super, the ATO’s qualifying earnings guidance says that from 1 July 2026 all commissions paid to an employee count, at 12%, including commission for work done entirely outside ordinary hours. The same page notes eligible contractors can be covered too.
United States: FLSA, outside sales and 1099 vs W-2
The Department of Labor’s outside sales fact sheet exempts reps from minimum wage and overtime only when their primary duty is sales and they are customarily away from your place of business. It says outside sales does not include sales made by mail, telephone or the internet. So a remote closer on Zoom is almost never “outside sales”. If they are a W-2 employee, they are owed at least minimum wage and overtime. If you want them on a 1099, the IRS contractor vs employee test applies, and it notes either side can file Form SS-8 for an official ruling, which may take at least six months. State rules can be stricter.
What does a salaried sales rep cost? Public ranges in AUD and USD
Salaries vary widely by industry, location, experience and whether super or bonuses are included.
- Australia (AUD): On Seek’s sales representative salary page (checked October 2026), average advertised salaries by industry ranged from $59,744 in call centre and customer service to $95,666 in healthcare and medical. Seek notes some disclosed salaries include super and others don’t.
- United States (USD): The BLS reports a May 2025 median of $72,080 for wholesale and manufacturing sales reps (excluding technical and scientific products), with the lowest 10% under $39,090 and the highest 10% above $137,550.
The $72,000 salary in the worked example sits inside both ranges.
Who each pay model is wrong for
Commission-only is wrong for you if…
- Your reps are employees and no award or agreement allows it (AU), or they are non-exempt W-2 staff (US).
- You want to set their hours, scripts and tools tightly. That control is the hallmark of employment.
- You have under 50 booked calls a month. Nobody good stays on $3,500.
Base plus commission is wrong for you if…
- You can’t afford the base in your worst month.
- The commission is so small it doesn’t change behaviour. Then it’s just a salary with paperwork.
A straight salary is wrong for you if…
- Lead flow is unpredictable and a quiet quarter would hurt your cash flow.
- You have no way to measure and manage call quality, because a salary alone rewards turning up, not closing.
Hiring trained closers and setters without starting from scratch
Whichever pay model you choose, the expensive mistake is hiring the wrong person and paying for the ramp twice. She Sells runs a recruitment service that places trained closers and appointment setters with businesses. She Sells reports an 84.6% closer placement success rate on its recruitment page for businesses hiring closers, where it says applicants are typically sent your way within 48-72 hours. She Sells says it currently works with 150+ businesses globally, and you always have the final say on who joins your team.
What this means if you’re the one being hired
If you’re a rep reading this, the crossover rule works in your favour too. Ask the business for their booked call numbers, show rate and close rate, then do the maths before you accept commission-only. If the numbers are thin, ask for a base or a ramp period. Our guide to commission-only sales jobs: pros and cons covers the job seeker side, and how to negotiate commission as a closer shows how to ask without losing the offer.
Building or growing a remote sales team? Book a free call with the She Sells team to talk about hiring trained closers and setters.
Results vary. Nothing here is a promise of income. See our earnings disclaimer.
Frequently asked questions
Is it better to pay salespeople commission or salary?
Neither is better everywhere. Commission is cheaper per sale when lead flow is thin, and a salary is cheaper once a rep reliably brings in more than their salary divided by your commission rate. Most businesses with steady leads land on base plus commission so the risk is shared.
Can I pay my Australian sales staff commission only?
Only if an award or enterprise agreement allows it, according to the Fair Work Ombudsman. Award and agreement free employees can be paid commission but must still receive at least the National Minimum Wage. Genuine contractors are different, but labelling an employee a contractor can be sham contracting.
Do I have to pay super on commission in Australia?
Yes for employees. From 1 July 2026 the ATO counts all commissions paid to an employee as qualifying earnings at 12%, and some contractors paid mainly for their labour can also be covered.
Are remote closers exempt from minimum wage in the US?
Usually not. The Department of Labor’s outside sales exemption excludes sales made by phone or internet, so a remote closer working as a W-2 employee is generally owed minimum wage and overtime. A genuine 1099 contractor is outside the FLSA, but the IRS and DOL look at the real working relationship, not the label.
What commission rate should I offer a closer?
It depends on your offer price, margin and whether there is a base. Work backwards: decide what you can afford per sale, then use the crossover rule to compare that against a salary at your real call volume.
