Economic crunch: Many employers now prefer commission-based salaries

A quiet but radical shift is reshaping Nigeria’s formal employment landscape.

Trapped under the weight of soaring operational costs, high inflation and dwindling consumer purchasing power, Economy&Lifestyle has discovered that businesses across major commercial hubs are abandoning traditional fixed salary structures.

Instead, many employers are now moving their workers, entirely or partially, to commission-based remuneration models, shifting the burden of low sales directly onto their staff.

From retail outlets to tech startups and manufacturing firms, the narrative is uniform: if you do not bring in revenue, you do not get paid. 

The survival switch

Years back, monthly base pay was the golden standard of employment security in Nigeria.

However, as business patronage slows to a crawl, companies say maintaining a high wage bill is no longer sustainable.

“We had no choice,” says Mr. David  Amaechi , the Managing Director of a mid-sized consumer electronics retail chain.

“Our foot traffic has dropped by more than 40 percent compared to last year.

“People are prioritizing food and fuel over gadgets. 

“We were faced with two options: either shut down operations entirely and lay off all 25 employees, or transition them to a performance-based system.

“We chose to keep them on, but now, a base salary only covers basic transport, while 70 percent of their take-home pay relies purely on the volume of goods they sell.”

Amaechi explained that while the decision was painful, it has kept his business afloat.

 “It forces the team to be aggressive, but more importantly, it aligns our expenses directly with our actual revenue.

“If the business doesn’t make money, we cannot afford to pay out millions in fixed wages.”

Workers bear the burden

While business owners view the move as an innovative emergency cushion, employees describe it as a fast track to financial insecurity.

 With the cost of transportation, housing, and utilities skyrocketing, an unpredictable paycheck is pushing many urban workers to the brink.

Chioma Nnaji, a sales representative at a drycleaning service company, shared her recent struggles under the new payment structure.

 “Two months ago, management announced that our basic salary was being cut by 60 percent, and the rest would be made up via a five percent commission on a number of clothes washed. 

“But the customers are simply not coming. Some days, we don’t make a single sale. 

“Those that come leave their clothes for months before coming to collect them.

“Last month, I went home with less than half of what I used to earn. My rent is due, food prices are rising daily, and I cannot even predict what I will earn next week.”

Labor experts warn that this trend could trigger widespread job dissatisfaction and a mental health crisis among the workforce.

The pressure to convert window-shoppers into paying clients in a depressed economy is turning workplaces into high-stress environments.

Economic analysts note that while commission structures are standard practice in sectors like real estate and insurance, their sudden adoption in conventional retail, hospitality, and corporate services reflects a deeper structural crisis.

“What we are seeing is the informalization of formal employment,”  Dr. Abiodun Shonubi, a labor economist, said. 

“Employers are effectively outsourcing their market risks to their employees. When consumer patronage slows because disposable income has been wiped out by inflation, it is unfair to penalise the floor worker who has no control over macroeconomic policies.

“While it helps businesses survive short-term cash flow crunches, it ultimately dampens aggregate demand because workers have less money to spend, creating a vicious cycle for the economy.”

However, given the scarcity of alternative job openings, many employees feel powerless to challenge the changes.

As the business landscape remains volatile, the commission-based salary model appears poised to stay.

For Nigerian employers, it is a necessary life support machine. For the average worker, it is another heavy layer of uncertainty in an already challenging economic climate.