Tag Archives: work

Salary vs Commission: Which Do You Prefer?

Salary vs Commission: Which Do You Prefer?Everyone’s job situation is different. Some people are paid hourly, others a flat rate for the year, and others on commission. There are advantages and disadvantages to each payment system, and it definitely takes some getting used to when changing from one system to another.

Here are the pros and cons for the 3 most popular compensation structures:

Hourly

Pros: It’s very easy to see that the more you work, the more you earn. If you are a hard worker, you have the potential to earn even more money for working overtime, which is often at a rate of 1.5 times the normal rate.

Cons: There is very little stability. Also, if you are sick or need a vacation day, you may feel guilty and go to work when you shouldn’t.

Salary

Pros: There is more stability here and it’s easy to know exactly how much you’ll make every pay period. You are likely entitled to benefits, which can help you take off work without having to worry about making less money.

Cons: There is not much ability to increase earnings since performance reviews are often once a year. Also, you may have to work more than 40 hours a week without being compensated for it.

Commission

Pros: The better you are at your job, the more you will get paid. There is no limit to how much you can earn.

Cons: You can never be sure how much money you will make in a given month, which makes planning difficult. Sometimes, factors outside of your control will determine if you have a good or bad month.

Throughout high school, I worked summer jobs, all of which paid me hourly. The more I worked, the more I got paid. So when I wanted to leave my job picking fruits and vegetables on a local farm at noon, it meant that I wouldn’t be making money during the afternoon.

After college, my first job was a set salary for the year. There was definitely a sense of security which I appreciated.

Now, my compensation consists of a base salary in addition to commission based on a percentage of sales. There’s no limit to how much I can make, which I like. I am able to motivate myself because I know that the harder I work, the better I will do, and the more I will earn.

What payment structure do you have? Do you like it? Which is your favorite?

Updated August 23, 2015 and originally published March 26, 2012.

Why You Shouldn’t Wait Until Next Year To Ask For A Raise

Why You Shouldn’t Wait Until Next Year To Ask For A Raise“Our company isn’t even giving out cost-of-living raises anymore,” my friend Tina lamented over drinks a few weeks ago. “The cost of gas is up; my rent’s going up in June; I’m even spending more at the grocery store. I don’t know where I’m going to get the money.”

Tina had just had her annual review with her supervisors, and, as you’ve probably figured out, it didn’t go well. While Tina had heard some of her co-workers had received modest raises – most of them dubbed “longevity” or “loyalty” raises to thank employees who’d stuck it out with the company during a recession-induced salary freeze – Tiny was bummed she hadn’t received a salary increase as well.

“There’s always next year,” Tina pined, sounded like a Chicago Cubs fan at the end of September.

But really, there isn’t always next year. Here’s why:

What A 3% Raise Is Worth To You Right Now

Say you make an average American salary – that’s around $28,000 according to the U.S. Census Bureau. If you work in a high cost-of-living state, like California or New York, you probably make more than that. What does a standard three percent pay raise get you?

$28,000 x 0.03 = $840

An additional $840 a year – which comes out to just over $32 a paycheck (if you get paid every other week), and that’s before taxes – might not seem like much. Depending on where you live, it might not even cover a single month’s rent or pay your yearly car insurance bill. When you do the math, you might find yourself thinking like Tina: wondering why she should even bother to ask for a raise.

What A 3% Raise Is Worth To Your Future Earnings

In Tina’s estimation, it’s ok if she doesn’t get a salary increase this year; she assumes she’ll just have more fodder when she ultimately asks for a raise 12 months down the road. She’s overlooking a critical fact.

Say next year, she does get that three percent pay raise. The year after that, she get a promotion which nets her a ten percent salary increase. After that, she receives a standard cost-of-living raise for four straight years before getting a loyalty raise of five percent the fifth year. Let’s do the math:

Her original salary was $28,000

  • Year one: she didn’t not ask for a raise, so her salary remained $28,000
  • Year two: she gets a ten percent raise, bringing her annual earnings to $30,800
  • Years three thru six: she gets a three percent raise every year, ultimately giving her an annual salary of $34,666 by year six
  • Year seven: she gets that five percent loyalty raise, bringing her salary up to $36,399

Now, let’s pretend that she not only asked for but got that three percent raise this year. How does that change things down the road?

  • Year one: instead of earning just $28,000 for a second straight year, she instead receives $28,840
  • Year two: thanks to the ten percent promotion raise, she is now earning $31,724 – almost $1,000 more than she’d be earning if she hadn’t received the year one raise
  • Years three thru six: with her annual three percent salary increase, she’s earning $35,706 by year six
  • Year seven: factor in her five percent loyalty raise, and her income is now $37,491

The net difference between a raise this year and waiting until next? During our seven-year example period, Tina would bring home an additional $6,838 simply by fighting for that small raise this year. Under this scenario, her annual salary will be $1,092 higher seven years from now; the gap between what she is earning and what she could have been earning will only continue to grow over the course of her career.

What A 3% Raise Is Worth To Your Portfolio

Seven years from now, let’s pretend Tina took the additional $6,838 she’d earned – just because she didn’t wait until next year to ask for a raise – and put it into an IRA. Let’s give the market the benefit of the doubt and assume she’d see an eight percent return on her investment. At that point she’ll be 32, so let’s look ahead another 28 years – after she’s reached that golden age of 59 ½ and can withdraw from that IRA without penalty – to see how much the $6,838 is worth now:

$58,992

It seems crazy to think that simply by fighting for a measly $840 right now, Tina can add more than $58,000 to her investment portfolio.

And, as astounding as that figure is, it doesn’t even take into effect a 401(k) match from her employer (which would grow right along with her salary) or any additional investments made based on her earnings past the initial seven years. Say she continued to invest an extra $1,000 – which she earned simply because of asking for a raise in year one – every year from age 32 to 60, along with the initial investment of $6,838. How much would her account be worth then?

$161,598

Sure, Tina could wait until next year’s annual review to fight for a pay raise. But she shouldn’t. She can’t afford to.

And neither can you.

The Hardest $100 I Ever Made

Previously I’ve written about the easiest $100 I ever made, but today is time to talk about the day I made the most difficult $100.

Actually, it was such a grueling job that it spanned 2 almost full days of work. When I was 16, I got a job making $7.25 as a farmer. I would bike to work at 6am and immediately start picking whatever the vegetable of the day was. Sometimes it would be corn (ever have fresh corn on the cob? The sweetest thing I’ve ever tasted), sometimes it would be strawberries (pick 3, eat 1), and other times it would be sugar snap peas.

But in August, it becomes planting season, which means a lot of weeding in the hot and humid field. And when things haven’t grown yet, it’s not really a field. Just a big brown area many acres long and wide. And I’d stand there weeding around the pumpkins for a few hours, making my way up the line. When I got to the end, I’d move one row over and work my way back.

Obviously this wasn’t the most interesting work, but the time managed to tick by just a little bit faster because I was working with a few friends from school. At noon, we’d go back in for a two hour break when the sun was hot and grab some cold water and usually some bread and jam. At 2pm, we were out the door and back to weeding.

It was brutally hot, 100+ degrees at times, and in New England, it was pretty humid, too. I would come home and shower and the dirt and mud would come off, but I was left with a mighty fine farmer’s tan that summer.

The reason I hated this work was because it involved no thought whatsoever. Every minute was the same as the last one and the same as the next one and there wasn’t much to look forward to. Why? Because the next day was going to be exactly the same. The only thing to look forward to was that I’d be picking an actual vegetable and would be able to grab a healthy bite to eat every few minutes!

Readers, what was the hardest $100 you ever made? Any horror stories from your teenage years?