Performance-related pay models are becoming increasingly common. During successful periods commission-based income grows, but recession may cut a large chunk out of the paycheck.
At five in the evening taxi driver Jussi Varis drives the taxi out of the garage and goes out to make a living. The shift lasts until morning.
As he sits down behind the wheel, he is not certain of a cent’s worth of income. His wage is determined by how many drives he manages to get during a shift.
He is paid on a commission-basis, much like the majority of Helsinki’s taxi drivers. Out of every euro the customer pays he gets 35-40 cents.
“During very successful nights I may earn 200 euro,” he tells.
The pre-Christmas season does not last throughout the year, though. Especially January and late summer are quiet times in terms of drives.
“Sometimes I am left with only tens of euros. The average night shift results in 50-100 euro.”
Many other workers also earn on commission. Typically they work in car shops, household appliance or furniture stores, as telephone sales people or real estate agents.
Some work solely on a commission-based salary. It is more common to have a base salary with commission.
Real estate commission
Almost 10,000 members of the Service Union United Pam receive some kind of commission salary. Two out of three members of the Union of Sales and Marketing Professionals SMJK have a base salary, in addition to commission, bonuses or both.
One of them is real estate agent Juha Kittilä from Helsinki. He works in the Helsinki city centre, and receives a base salary of less than 500 euro in a month. He also gets a share of an apartment’s sales fee.
Kittilä sells three apartments in a month on average. It takes a lot of imperceptible work. He needs to be on the phone constantly.
Kittilä does not want to give exact information on his incomes. He does state that a good month may yield 100,000 euro.
“There are also months with zero income. If no apartments are sold, that is the way it is.”
One must learn to live with a fluctuating set of income, he says. Once money is available, it has to be put to savings.
“Income varies, it is part of the job. Many try it out and are defeated after a few bland months. It is worth knowing that bad months will pass.”
Kittilä says that the real estate field has many different wage models that vary according to firms and domains.
Some companies have larger base salaries, for example 3,000 euro per month. On top of that a moderate commission may build up. The base salary may also be low, like Kittilä’s, but the commission is high.
“Some suffer from the uncertainty of their incomes, so they choose a high base salary. I see the fluctuation of sales more as an opportunity.”
Commission pay is one model for rewarding the employee’s performance at work. Other methods include bonuses, individual increments, incentives and profit rewards that are granted to the entire personnel.
Commission pay and other models have their benefits, but also downsides, says Head of Consultation at Pam.
“It is good that sales people earn well, when times and business are good.”
The commission works as incentive to succeed, when it is immediately reflected in the paycheck. The better the employee’s result the better it is for the company as well.
“Individual incentives increase sales results up to fivefold,” says Head of Education and Research at the Union of Sales and Marketing Professionals SMJK, Jouni Röksä.
“If a top salesperson receives the same income regardless of the result, it is not motivating in the long run. They will easily find new work, where results are evident in wages.”
Incentive not always enough
The salary may remain small, no matter how one does their work. This is reality for taxi driver Jussi Varis, who lives only on commission.
“I can influence results to the extent that I know where people move and at what time. Yet income cannot be endlessly influenced, no matter how good the customer service. It is also a matter of luck, if one gets drives,” he says.
Varis has been a taxi driver in Helsinki for about five years. Recently taxis have been used less, he says.
“It has been quiet. I have thought about turning to another line of business.”
The downside of commission pay has been evident during recession. Jouni Röksä from SMJK says that some companies have changed wages to be based more on commission during economic instability. As the markets have become more strained, salespeople have to work even harder to maintain the previously solid income.
“In reality it is a matter of reducing wages,” Röksä points out.
Employees may also be pressured into becoming entrepreneurs. They may be offered a commission that matches the former monthly salary. During a depression this may be a difficult task.
Contrary to common belief, Finland does not have a minimum wage. The law dictates that the income level must be reasonable, though.
“What’s reasonable is technically defined in court,” Röksä states.
Collective agreements ensure minimum wages in those fields that have them. “Individual agreements are allowed, but they must guarantee the employee at least the minimum wage as stated by the collective agreement,” Ojala from Pam says. Telemarketing still does not have a collective agreement.
“We have cases from so-called call centres, where a telesales person has worked full-time for a month, and is left with fifty euro,” Ojala says.
JAANA LAITINEN – HS
ANNIKA RAUTAKOURA – HT