Ken,
Where can I find information on the best commission structure? Are there any good sources for our industry? Do I need a contract for a W2 or 1099 salesperson?
JR
Answer:
I don’t know if the old commission rate of 10% of the install and two months recurring monthly revenue (RMR) is commonplace now. Perhaps others can share what the “going rate” seems to be for commissioned salespeople.
You do need a contract. In some places, New York included, if the commission agreement is not in writing and there is a dispute then the only one who can testify to the deal is the commissioned salesperson. It’s best to have it in writing.
For employees, use the Standard Employment Contract. Fill in the blanks. For a 1099 person, you can still use the Standard Employment Contract though it needs some modification because the salesperson is not an employee but an independent contractor (call our Contract Administrator, Eileen Wagda, at (516) 747 6700 ext. 312 for a modified version) of the employment contract to use with a 1099 person. But be sure that your relationship with the salesperson is truly as an independent contractor and not an employee that you’d rather not cover with workers comp, unemployment and any other benefits you offer to your employees. A true independent contractor should actually have other clients or businesses that he/she works for, should not have to report to you with time records, should have its own business records and other criteria for a true independent contractor. Think of a subcontractor who works for you and other alarm companies; someone you have to check with to see if they are available; someone who will work independent of your supervision — that is the sign of a true independent contractor.
If your 1099 person is really an employee, then I suggest you treat him or her as such; use the Employment Contract and pay them as a W2 employee.
I am curious how commission rates vary, so I’d like to hear from a few of you. I assume rates will vary depending on the area and the type of alarm system. I’ll post the rates anonymously.
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