Companies bleeding revenue and burned out on underperforming salespeople will often look to cut their losses, starting by terminating sellers who aren’t hitting their goals. Some hiring managers take this a step further by reevaluating compensation and assessing whether to take on sales reps as independent contractors, rather than as employees.
When employers would rather “try before they buy,” they often ask, “Why should I pay more for salespeople who haven’t proven themselves?” Instead of incurring costs for benefits, employee taxes, and unemployment, employers offer sales positions at 100 percent commission for independent contractors in order to maximize profit and limit liabilities.
In many cases, it makes sense for companies, especially those in high-growth mode, to augment their sales forces with independent contractors. There are a few considerations companies should make before taking the plunge and hiring independent contractors.
But the company’s tax position isn’t the only consideration. The US Small Business Administration specifically defines the roles of employees versus independent contractors. Pay close attention to how the job’s responsibilities are structured, including hours, reporting structure, quotas, and job duties. Is your contractor performing tasks an employee might otherwise do? If so, consider converting that independent position to a full-time employee.
Recruiters often hear from hiring managers that the best and most motivated sellers will work on commission only. While this holds up in theory, it’s not often the case. Because sales reps are in high demand (CareerBuilder’s database reveals a three-to-seven ratio of job seekers to job posters for sales positions), the best sellers can pick and choose opportunities, which include permanent positions with benefits, expense accounts, and paid time off for starters.
There are many sellers, however, who may prefer to work on a commission-only, independent-contractor basis. Try networking with local professional organizations to attract like-minded sellers who are looking to add a new service to their portfolio.