Should You Give Your Salespeople a Pay Rise Based on Inflation?
The reality is simple. You need to do more to get more money. You're not a handout.
High inflation and a tight labor market have organizations and people squeezing pocketbooks. In May, the year-over-year consumer price increase hit a 40-year high, according to the U.S. Bureau of Labor Statistics.
Many employers and employees are debating whether to adjust wages, increase retention bonuses and revise total compensation due to the increased cost of living. I am having the same conversations with business leaders all over.
So, should you give salespeople a pay rise based on inflation? No. Base pay is not a handout. The reality is your salesforce needs to produce more to get more. Salary increases are triggered by significant responsibility adjustments (quota size, team lead, etc.).
I’m not saying salespeople shouldn’t ask for higher wages. It’s America. But, when a team member comes to me for a salary increase based on the higher cost of living or seniority, I have a problem.
If sales team members ask you for a pay rise, read this first.
Rose Garden Sales Accelerator Process
Rising inflation & base pay raises for salespeople
It would be wildly inappropriate for any organization to say;
“Hey, existing employees. Labor shortages, market conditions, and increased supply charges mean we must change our salary budgets. Therefore, your average hourly wages, $80,000 yearly, will need to be cut to $65,000.”
While many organizations will not do this, some do. And most people will agree that it is not right.
And we would tell most organizations in that position to figure it out.
Get better and sell more.
Cut costs elsewhere.
You don’t commit to paying someone $80,000, only to say when something’s changed – let me pay you less.
That’s wildly inappropriate.
Now, if we can all agree on that dogma, surely the same can be said on the flip side with the same principle.
It doesn’t make any sense.
Now, I understand the human need for money to satisfy a lifestyle.
I completely understand. I completely agree.
But, firstly, let’s be clear. Salespeople are not low-wage workers. Most sales compensation budgets include wages, paid vacations, sick leave, parental time, and essential benefits and incentives often dictated by the labor market, reflecting market supply and demand, not inflation.
Rent is up. Childcare prices are up. Gas prices are up.
But, guess what? Inflation rates have not stopped you from going to bars and clubs. It hasn’t prevented you from purchasing $1,000 phones and the newest stuff. You are still eating out at that fancy restaurant.
I have seen many salespeople use “rising prices” to try and justify a promotion.
However, a promotion is to upgrade their lifestyle rather than making a living adjustment.
I was living recklessly before because I could afford to do it. Well, now I can’t afford to live recklessly anymore. So let me ask for more money. No, it doesn’t work that way.
When salespeople ask for salary increases
I’m not saying salespeople shouldn’t ask for higher wages.
This is America. You get to live your life exactly how you want.
But the reality is straightforward. You need to do more to get that money. You need to increase performance. You’re not a handout.
If your sales force asks for higher wages, don’t just give it to them. It will create entitlement.
You will create a monster because it’s never enough.
They take. Take. Take. It will feed an unaccountable culture.
And your other salespeople, top performers, and others who don’t ask for a pay rise will see how you reward certain employees, and culture will develop around that.
Consider this example,
You’ve got two salespeople on $80,000 a year.
One’s living recklessly, the other living within their means.
The one living recklessly wants pay increases, whether it’s inflation or seniority compensation, and you grant them a pay raise.
Let me say, those responsible in their personal life are likely responsible in your organization.
They also have enough pride, decency, and respect not to come and ask for a pay raise.
These are the right people that you want to grow your organization with, but you’re only rewarding the greedy employees that are only in it for themselves.
They have no desire to contribute more. No desire to improve performance. Add value to the company.
Now, imagine you lose the respect of that individual after rewarding the other greedy salesperson with a pay rise. They look for employment elsewhere.
You’ve lost one quality sales representative while the other continues taking from you and your organization.
Employers talk track
So, when someone comes and asks you for a raise, what do you do?
Don’t say no.
What you end up saying is:
We’re paying you at this rate for X output, correct?
Let’s say you’re paid $100 an hour, working 40 hours a week, and I expect you to produce 40 widgets.
So alright, that’s 100 bucks a widget.”
Your employee or salesperson says;
“I want an increase in average hourly earnings of $200.”
Well, you would go back to them and say:
You need to produce X output to get that pay rise.
So, now you do two widgets per hour. I need 800 widgets a week.
You do 800 widgets weekly; I’ll pay an extra $200 an hour.”
Now, they’re valuable to your organization.
I always said it’s not for nothing. Nothing’s free.
Okay, you want more? What more are you going to do? What more are you prepared to do?
I’m ready to give you more if you’re prepared to do more. Simple.
Rose Garden Consulting
Do you need help with your sales compensation packages?
There are a million different ways to pay salespeople; however, if you follow our basic structure, you’ll find that you’ll motivate the behaviors that will help grow your company.
Remember, salespeople are paid to sell. Ensure they are valuable to your organization. You’re ready to give more if they’re prepared to do more.
For more information on commission incentivization, speak to Rose Garden Consulting.
Let me be clear, if you were going to find the solution to your sales problems, you would have seen and solved them by now.
It’s likely you need support and help to solve them.
About the author:
Ali Mirza is the Founder & CEO of Rose Garden, a national sales consulting organization, and featured in Forbes, Inc, Business Insider, The Huffington Post, Business Rockstars, and The Wall Street Journal.
Ali is a highly sought-after public speaker presenting at multiple national conferences on innovative ways to accomplish transformational growth on your sales team.
Rose Garden provides unparalleled support and guidance to growth-minded founders via sales strategy differentiation, world-class sales culture creation, and exclusive playbooks, processes, and scripts to position them for limitless growth.