Fixed Income vs. Commission-Based Income Which is Better

At some point in your professional life, you may begin to wonder if your current job is providing you with the best-earning potential. There’s nothing wrong with evaluating your career based on that aspect, especially if you feel that it no longer meets your current needs. Depending on your current goals or projected career path, it may be time to visit (or revisit) the topic of fixed income vs commission-based income.

There are also several other major factors that can influence your decision to switch to either income type. What motivates you, the type of environment that appeals to you, your preferred working style, and your personality type are all valid considerations. All of these apply whether you’re a fresh graduate figuring out which type is the best to start with or you’re thinking of making the switch later in your career.

Is the subject new to you? Here is a quick guide to help you determine which of the two income types may work best for you. 

What are fixed-income careers?

As the term suggests, fixed-income careers come with a definite salary or rate that an employee receives on a weekly, bi-weekly, or monthly basis for the work rendered. Your workload may change from time to time, and your responsibilities may shift when the need arises. You may also be tasked to bring some clients or businesses into the company, but whatever the result, your pay is not affected. This is the typical employment setup that most companies hire for.

Examples of fixed-income careers in Malaysia include roles in Admin/Human Resources, Marketing, Computer/Information Technology, and Accounting/Finance sectors. All of these are among the top eight most in-demand industries looking to fill vacancies in Malaysia.

Advantages of fixed income

1. Income stability.

For many employees, the stability provided by a weekly or monthly paycheck gives them peace of mind and confidence in their employment. As such, it’s easier for them to plan a budget and manage their finances.

2. More predictability in your working days.

Most fixed-income jobs come with specific duties and responsibilities that employees must carry out daily. Likewise, the variations in their tasks and roles don’t affect the amount they get every payday. As such, the predictability that these jobs provide makes working days more smooth sailing and manageable for most employees.

3. Better focus and productivity.

With the security of a regular paycheck and a fixed salary rate, employees have less to think about. As such, they tend to be more productive and focused in their jobs. High performers feel they are compensated well for their efforts, while underperformers don’t feel demotivated for not receiving less during their pay schedule.

4. Better collaboration with peers and managers.

While some competition is expected in and out of teams or departments, fixed-income jobs tend to foster better collaboration. This is because the salaries of both team members and leaders are not affected by the outcome of their projects or campaigns. As a result, they are able to focus more on the tasks and goals at hand instead of worrying about how much they will get paid.

Disadvantages of fixed income

1. Fixed income stream.

Yes, you’re reading that right. What some may consider stability may seem limiting to others. Since most fixed-income careers are based on the pay scale or salary grade for the position or industry, it can be frustrating for long-time or highly-experienced employees, especially when they switch careers.

2. Hard work may not feel as rewarding.

Fixed-income employees are paid the same rate regardless of changes in their workload or responsibilities. As such, some of them may feel that the compensation isn’t enough whenever they put in extra work or effort in their daily work. This is especially the case when they notice that their teammates are not working as hard as they do but get paid the same rate anyway.

3. Longer working hours.

Most fixed-income jobs require a fixed work schedule, which means you must stay in the office even if you finish tasks early. This can be seen as longer working hours, a good portion of which you may be spending on personal time or other paid projects. 

What are commission-based careers?

Again, as the term indicates, employees get paid in commissions instead of a fixed rate in this career type. As such, these jobs provide flexible income. The earnings of commission-based employees are typically based on performance or the revenue they are able to bring to a company. Some personality types may also thrive in the intensely competitive nature of commission-based careers, especially when the stakes are high and they are confident in their success. 

Examples of commission-based positions include insurance agents, real estate agents, salespeople, and recruiters/headhunters.

The Sales field also ranks third among the most in-demand job specialisations in Malaysia, so it’s not surprising if you’re considering a commission-based career in this sector.

Advantages of commission-based income

1. Unlimited earning potential.

The most obvious draw of commission-based income is the unlimited earning potential. These jobs are designed to compensate you for the amount of work (or sales) you put in. If you perform well enough, the company may also increase your commission rate, which brings the possibility of bigger income and other rewards.

2. Solid sales portfolio.

If you’ve decided to dedicate your career to sales, commission-based jobs will no doubt give you the training and strategies to become a talented salesperson. It will also certainly show in your portfolio, and will likely help you progress to a different role or new positions in other companies.

3. Flexible work schedule.

With commission-based jobs, you are essentially your own boss, as you can create your own work schedules. You can make appointments and visit clients at the most convenient time instead of set hours. This flexibility is often desirable to those who would like to establish a routine that works best for them.

4. Higher independence.

Once commission-based employees become seasoned salespeople, their managers will often give them more freedom in how they approach their work. As long as they meet their quota, they are allowed to work with minimal supervision. This setup may result in employees feeling less pressure from their managers, boosting their overall performance.

Disadvantages of commission-based income 

1. Income fluctuations.

In commission-based income jobs such as sales and agency work, when you don’t make sales, you also don’t make money. Your income depends on how much you bring into the business, which can be very stressful when you need a steady income to live on. This can also affect your personal finances, especially your eligibility for loans or your ability to secure low-interest rates.

2. Higher tendency for unhealthy competition.

In a highly competitive environment like commission-based jobs, some employees buckle under a hostile work atmosphere. Increasingly competitive employees may not work well together with other team members and hyperfocus on their own gains.

3. Potentially strained customer relationship.

Employees in commission-based income jobs tend to be trained with aggressive techniques and strategies for securing sales. However, if they’re not careful, it may turn off current and potential customers instead. This can strain customer relationships and affect sales in the long run.

4. Slow business makes for low income.

Even if you’re a top performer in your company, you may have difficulty making high sales or reaching your quota when the business is slow or the market is poor. This can lead to either diminished pay or being let go due to perceived poor performance. 

5. Higher turnover rate.

The previous point often leads to a high turnover rate in many commission-based companies. When employees don’t meet their quota or consistently underperform – whatever the reason – they become easy targets for layoffs. 

Fixed income vs. Commission-based income: Which is better?

Based on the pros and cons mentioned above, choosing between fixed income vs. commission-based income is not easy for everyone. A fixed-income career may be the obvious choice for most. Not only does it follow the traditional working setup, but also promises a more stable income and more secure employment. However, we also cannot discount the fact that the promise of unrestricted income and a high level of independence may be more attractive to some employees.

Still, what works for one employee may not turn out well for another. The best scenario, therefore, is to have a fixed-income job as your main profession and have a commission-based job to supplement your earnings. This way, you can enjoy the benefits of both types and minimise their disadvantages.

Another alternative is to keep an eye out for careers that provide both income types – one that comes with a fixed salary and an opportunity to get a commission on the side. For example, you may encounter a Marketing Associate job that includes a commission as an incentive for sales or securing a client deal. It’s the best of both worlds in terms of compensation for your hard work and top performance as a valued employee! 

Summary

The topic of fixed income vs. commission-based income is a complicated subject matter that many employees may encounter at some point in their careers. Both come with their own pros and cons, which employees must also weigh against their needs, goals, and priorities. Many other factors may also affect success or failure in either of the two career options. Therefore, one choice may not necessarily be better than the other.

At the end of the day, taking the risk with a commission-only job or being content in a fixed-income role all depends on you. Weigh the pros and cons carefully. See which option is likely to align with your priorities, coincide with your skills and competencies, or give you the most benefits. Don’t discount the possibility of making the best of both worlds. And when things don’t work out, keep in mind that you are free to pursue other opportunities that may work better for you! 

Have you already decided between a fixed income vs. a commission-based income job? #SeekBetter jobs, starting with creating or updating your JobStreet profile today! Download the JobStreet app for iOS or Android to search for jobs, send applications, and track updates on the go. Lastly, check out the Career Resources page as well for more tips on job searching, self-improvement, and career advancement!