Beyond regular paychecks, there is a range of formats that employers can choose to compensate their employees with. As a small business owner, it’s essential that you know the different types of payment that you can offer. 

Three Types of Payment Employers Might Give Their Employees

Alternative compensation formats allow you more flexibility when hiring. This lets you tie performance to compensation, or even attract talent which you may otherwise be unable to afford through traditional salaries. 


The commission is compensation that is primarily associated with sales positions. You’ll want to offer your salespeople a mixture of a base salary and commission, as they will likely appreciate some form of stability in their income. The commission is probably the best way to link employee performance and compensation – as if your salespeople don’t sell, they won’t get paid.  

However, established salespeople can expect to make most of their earnings through commissions. If you’re hiring for a high-level sales position, you’ll want to make sure that the commission percentage reflects that. 

The average commission rate will depend on what you are selling and in what industry – most manufactured products will have commissions of 7 to 15 percent. You can also adopt a sliding or variable scale, increasing the commission you offer depending on how much your people sell. For example, selling more than $100,000 worth of product could increase the commission by a percentage point. 

If you’re contracting with independent salespeople instead of in-house staff, you may want to consider using a service like to keep track of your commission payments. 


Bonuses are another effective way to tie performance to compensation. They are usually only accessible to successful and established businesses that have the profit margins to pay them out. 

You have to make sure that bonuses are clearly explained to your staff. It may be useful to tie bonuses to company performance as well. You don’t want to have to pull the rug out from your staff at year-end after a bad year, telling them that they won’t get their bonuses. 

You never want your employees to feel as if you are determining bonuses based on favoritism or a whim, as it can lead to bad blood and high turnover.  

Stock Options

Stock options are a great solution for both startups and older companies. By giving employees stock options, startups are able to attract young talent at salaries that are below the market level. This also ties compensation directly to the performance of the company. 

The better the startup does and the more money it makes in the future, the more those options will be worth. 

Established and larger companies can also benefit from giving employees stock options. Again, this can be used in lieu of actual salary increases, or as a way to encourage retirement savings.

Make the Compensation Match the Job

In the end, the best way to attract talent to your business is to match your jobs with different types of payment. Start-ups are likely to offer stock options, whereas commissions are better suited for the sales department. 

For more information about running a small business, check out the Business section of our blog! It’s full of great advice that can get you started or help you along your path to success.