Salary Q: Commission vs. Bonus

[Cappy]

My husband's supervisor resigned and he's interviewing for her position. They've asked for his salary expectations. He knows everyone's salaries and the boss was only making 10k more than him. It's a non-profit and everyone is paid poorly. He suspects being an internal candidate further reduces his chances for more money. The new role is responsible, in part, for all new business development. One idea he had was to propose a base salary of what the last person made + commission or bonus for any new paid service contracts he brings in. Is there a difference in terms of the two as to which is better and why? A quick look seems like they are both taxed the same. Also, what kinds of % is typical for this supplemental pay? 

[Susie]

My compensation is multifactorial, but even before I was a partner and was receiving profit distributions, I received a base salary plus quarterly bonuses/incentives.  The incentives were basically commissions on my receipts, since they were calculated according to a particular equation. 

Come tax filing time, there was no impact on my tax liability as far as whether dollars were received as salary vs. bonus, they were treated the same way.  Some years a bigger proportion of my income was bonus vs. salary, other years it went the other way.  The only thing I had to watch, was that withholdings were higher (for better or worse) on bonuses than salary because it was treated as if all my biweekly pay amounts were that high.

I prefer an arrangement with higher salary/lower bonuses, because it affords more predictability for my monthly expenses, and there's a "now" value to getting paid biweekly vs. waiting for quarterly or annual bonuses.  Getting significant bonuses can be a nice way though to save for big things outside the usual cash flow.  We generally try to live on salary, and the bonuses are for extra stuff.  Last year only about 55% of my total comp came from salary.

As far as % though, I am not in the non-profit sector so I have no insight into what a reasonable ask might be.

[hbomdiggity]

Tax wise it’s all income. The tricky part may just be when it’s paid and the unpredictability.

I think of commission of meaning a portion of every sale vs a bonus being more goal oriented ($x in sales and you get y bonus).

[bee20]

If he is looking for a simultaneous increase in base pay and adding a commission or bonus that may be tough but offering them both and settling for either seems likely. For a commission 5% is on the low side if it's more of a bonus, up to 40% for a senior outside sales role that relies on the commission, at least those in the industry I was in through college. My bonuses in corporate america have ranged from 1-15% depending on the industry and how the business is doing.

If he is applying for a role one rung up, have him think about it from his boss' boss' perspective. Would your husband be able to bring in significantly more money than the existing person? If he got 10% and it's a nonprofit, would that upset donors or increase the admin percentage? What percentage of a typical year of business development is the base salary? And finally, would he be bringing in money on his own, or with his team? How would members of the team feel if they don't get a commission but he did?

[Cappy]

Feb 8, 2022 0:11:47 GMT -5 bee20 said:

If he is looking for a simultaneous increase in base pay and adding a commission or bonus that may be tough but offering them both and settling for either seems likely. For a commission 5% is on the low side if it's more of a bonus, up to 40% for a senior outside sales role that relies on the commission, at least those in the industry I was in through college. My bonuses in corporate america have ranged from 1-15% depending on the industry and how the business is doing.

If he is applying for a role one rung up, have him think about it from his boss' boss' perspective. Would your husband be able to bring in significantly more money than the existing person? If he got 10% and it's a nonprofit, would that upset donors or increase the admin percentage? What percentage of a typical year of business development is the base salary? And finally, would he be bringing in money on his own, or with his team? How would members of the team feel if they don't get a commission but he did?

PDQ but some numbers/answers:

He is applying for one rung up in a 12 person non-profit. His salary is 59k with 14 years of employment at this same non-profit. The woman leaving is at 70k with 5 years at the nonprofit. Business development was something they wanted her to try, but it was not something she ever embraced. He has significantly better professional contacts than his boss due to organizational longevity and his leadership within community organizations. And he has the desire to do business development. The 2 positions supervised by the new role would not be involved in business development, just program/service delivery. The organization is funded by a pharmaceutical endowment (this covers operating expenses) as well as reoccurring State Dept. grants and fee for service, not individual donors. They do cultural training for corporate & government clients and global relocation. Typical program/service is 3k to 5k per program but some are as high as 20k if it is a longer program. They currently get end of year bonuses that are unstructured. Usually around 1-2% if I had to guess.


TBH, I really wish he'd just go find another job that pays market rate to begin with and has a proper benefits. 

[bee20]

With the departing person having less years at the nonprofit (and presumably equivalent overall experience) it doesn't seem unreasonable that he should get the same.

Assuming they get 30 of the smaller programs per year and he was at 5-10% commission, he'd need to double the number of programs to get the pay differential, but 20% starts to feel like a lot if it's a service product that will require more staffing etc. to give and may not be a recurring project. It might be worth coming in asking for the increase in base and the commission and see if they bite on commission.

[Cappy]

Feb 8, 2022 13:34:51 GMT -5 bee20 said:

With the departing person having less years at the nonprofit (and presumably equivalent overall experience) it doesn't seem unreasonable that he should get the same.

Assuming they get 30 of the smaller programs per year and he was at 5-10% commission, he'd need to double the number of programs to get the pay differential, but 20% starts to feel like a lot if it's a service product that will require more staffing etc. to give and may not be a recurring project. It might be worth coming in asking for the increase in base and the commission and see if they bite on commission.

Thank you for your suggestions and feedback! He put in the request as "75k + discussion regarding additional performance-based structure for new business development". That leaves the discussion a bit open should he get offered the job.