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Sales pay equity is more than a trend—it's a crucial component for building a motivated, engaged, and high-performing sales team. When compensation structures are transparent and fair, employees are more likely to trust the process, perform better, and stay with your company longer. However, achieving pay equity can be challenging, especially when factors like geography, product lines, industry, and job roles come into play.
Failing to achieve a fair pay structure between teams can have negative impacts on employee general happiness, motivation, turnover and generally your company’s performance. In this article, we’ll explore the common challenges businesses face in ensuring pay equity and in the second part of the article provide actionable solutions to tackle them.
When compensating sales teams, geography plays a critical role. Different regions have varying costs of living, market conditions, and economic realities, making it difficult to maintain consistent pay equity across borders. For example, a salesperson based in the US can expect a higher salary base salary than in Europe, due to the cost of living differences. This regional variation can lead to inequities, even when performance metrics are equal.
In fact, research shows that sales compensation can vary by as much as 30% depending on location, a disparity that can create friction if left unaddressed. Organisations must carefully consider regional pay benchmarks and adjust accordingly to maintain fairness.
Additionally, certain markets are more mature than others. When advocacy and development is needed, the sales’ work will not bear direct fruits but may be essential for the strategic development of the company. In that case, it is important to take that market maturity in count when thinking about pay equity.
Salespeople handling different product lines may have vastly different compensation structures based on the product’s complexity, market demand, or sales cycle length. A rep selling a SaaS product with a short sales cycle may be compensated differently than one selling a high-ticket, hardware-based solution with a long sales process. If these differences aren’t properly accounted for, it can lead to internal conflict and a lack of motivation for teams handling more complex sales.
The industry you operate in also has a significant impact on how you structure compensation. In highly regulated industries like pharmaceuticals or finance, sales cycles tend to be longer and require deep industry knowledge. This often leads to higher base salaries with a smaller variable component. Conversely, industries with lower barriers to entry may focus more on commission-based pay to drive short-term performance. Balancing these industry-specific demands is crucial to ensuring equity across teams.
In a typical sales organisation, you may have Business Development Representatives (BDRs), Account Executives (AEs), Account Managers (AMs), Sales Engineers (SEs), and Product Sales Managers (PSMs), each contributing to the sales cycle in distinct ways. For example, AEs often close deals, while BDRs focus on lead generation. It may be complex to find a right balance the reward the contributions on one same deal for such different roles.
Not all accounts are created equal. Some sales reps manage high-value enterprise clients, while others work with small and medium-sized businesses (SMBs). This disparity can lead to unfair compensation structures if the complexity and revenue potential of accounts are not properly factored in. For example, managing large enterprise accounts often requires more time and effort but may not always result in proportional pay increases, creating an imbalance.
One of the most effective ways to ensure pay equity is to establish a standardised compensation framework that includes adjustments for cost of living and market conditions across different regions. This ensures that employees in higher-cost areas are adequately compensated without creating significant pay gaps between regions. Leveraging market data to benchmark salaries for each location is critical in maintaining fairness.
According to a study by Payscale, companies with standardised compensation structures see a 22% improvement in employee satisfaction and retention rates. By aligning regional pay with market realities, organisations can maintain fairness while motivating their sales teams across geographies.
To avoid inequities, companies must tailor their compensation structures based on the complexity of the products being sold. Sales reps dealing with complex, high-value products should have compensation plans that reflect the longer sales cycles and higher level of expertise required to close deals. Establishing different commission rates or bonuses based on product lines can help create a fairer compensation system across the board.
When operating in multiple industries, it’s important to account for industry-specific nuances in sales compensation. For example, in sectors with long sales cycles and regulatory hurdles, offering a higher base salary with smaller bonuses might be more effective. On the other hand, in industries with fast-moving products, a commission-heavy model could better incentivise performance. Conduct regular market research to ensure your compensation plans reflect industry best practices and keep your team motivated.
For sales teams with varied roles like BDRs, AEs, AMs, SEs, and PSMs, it’s crucial to differentiate compensation structures. For instance, BDRs are often incentivised with bonuses for lead generation, while AEs might have higher commission rates for closing deals. Tailoring your compensation approach to match the unique responsibilities of each role ensures fair pay and fosters a collaborative environment where everyone feels valued for their contribution.
A study by the WorldatWork found that organisations that tailor their compensation plans to different job roles experience a 20% increase in employee engagement and performance. Making sure that everyone is compensated in a way that reflects their role within the sales process will help maintain fairness and drive better results.
For instance, the following picture depicts an interesting way to design and understand the clear scope of various roles. Using this method can be useful in designing a fair and appropriate pay mix as it shows the value that each role brings.
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Ensuring pay equity is no small feat, especially when balancing different factors like geography, product complexity, job roles, and industry standards. However, with Amalia’s compensation management platform, you can easily configure compensation plans that adapt to your team’s unique challenges, by using simulations on plans to forecast costs and revenues according to different growth scenarios. Our platform helps you tailor compensation structures, and ensure fairness across the board, giving you the tools to build a motivated, high-performing sales team.
Ready to ensure pay equity in your organisation? Let’s get started with Amalia today.
