The dirty secret in sales: How managers shift their risk onto freelancers and outsource responsibility

Fixed salary for managers, full risk for sales?

Why this sales model is a trap for freelancers and a risk for companies

In the modern business world, it's often touted as a clever strategic move: freelance sales or marketing professionals working exclusively on commission. For companies, it seems like the perfect model – no fixed costs, payment only upon actual success, and maximum flexibility. But behind this seemingly elegant solution lies a serious structural problem that management is reluctant to discuss. It's the systematic and often unfair shifting of entrepreneurial risk onto individuals who have little influence on actual market conditions. While the executives who initiated the arrangement enjoy their secure fixed salaries and evade operational responsibility, the freelancers bear the full burden of uncertainty. The following text examines the economic, psychological, and, above all, ethical downsides of pure performance-based compensation. It unflinchingly reveals why this model not only becomes an existential burden for those involved but also massively damages the companies themselves in the long run – and what fair, sustainable collaboration in sales should look like instead.

The silent betrayal in sales: How managers outsource their responsibilities – A symbolic image of the unequal distribution of burdens

The practice of engaging freelance sales and marketing professionals solely on a success-fee basis is considered a smart business solution in many companies. However, a closer look reveals a pattern that goes far beyond a mere question of compensation. It represents a structural shift of entrepreneurial risk onto individuals who can neither manage nor adequately mitigate this risk, while those who initiate the model leave their own position and fixed salary untouched. This analysis examines the economic mechanisms behind this practice, its consequences for companies and freelancers, and the professional ethical dimension, which is often neglected in the discussion surrounding sales commissions.

Why commission-based models seem so tempting

From the perspective of a sales or marketing manager, recruiting freelancers on a purely success-based model initially appears to be an elegant solution to a classic dilemma. Fixed personnel costs pose a risk in economically uncertain times, while compensation tied solely to actual sales seems to eliminate this risk. Companies only pay when revenue is generated and save considerable personnel costs during periods of low sales. From the manager's perspective, this also means that their own salary and position remain secure, regardless of whether the hired freelancers are successful or not. It is precisely this asymmetry that lies at the heart of the problem.

The business logic underlying this model follows the more general economic principle of risk shifting, as extensively described in research on the so-called gig economy. Companies reduce their own entrepreneurial risk by demanding greater flexibility from their workforce, thereby exposing them to significantly higher personal risk. Five mechanisms enable this transformation of business risk into personal risk: short-term contracts, flexible working hours, variable compensation, short-term scheduling, and reduced insurance coverage. In sales based purely on commission, the variable compensation and the de facto absence of any social security are particularly significant.

The shifted burden: Who really bears the entrepreneurial risk?

In a traditional employment relationship, the employer assumes the majority of the market risk. Employees receive their salary regardless of fluctuations in customer demand, which provides planning security. If this principle is reversed, as occurs with compensation based solely on performance, the workers bear the full market risk alone. If success fails to materialize due to changing market conditions, poor product positioning, or inadequate internal processes, the freelancer alone bears the consequences in the form of lost income. This situation is particularly problematic when freelancers are assigned to a product or service whose quality, pricing, or market maturity they cannot influence.

It is noteworthy that the success of a sales deal generally depends on numerous factors beyond the control of the individual salesperson. Market penetration, the purchasing power of the target group, the distribution of potential customers, and the overall competitive landscape all significantly influence success, regardless of the freelancer's individual skill. A compensation model based solely on raw sales figures therefore systematically disadvantages those who have to work under less favorable conditions, even though their actual performance may be comparable.

Legal boundaries that are ignored in practice

Interestingly, the model of purely performance-based compensation is inadmissible under German labor law in many situations as soon as an employment relationship exists. The Federal Labor Court has repeatedly ruled that compensation without any fixed salary or with a fixed salary below two-thirds of the industry-standard collectively agreed wage is considered unconscionable. The reasoning lies precisely in the principle examined in this analysis: A company may not completely shift its business risk onto its dependent employees, as this constitutes an unreasonable transfer of entrepreneurial responsibility.

This legal protection, however, only applies to traditional employment relationships and is largely ineffective in genuine freelance arrangements. Those engaged as freelancers on a fee-for-service basis or as independent sales representatives lack comparable legal protection and formally bear full responsibility for their entrepreneurial risk. Some sales and marketing managers deliberately exploit this legal loophole to establish a structure that would be legally unenforceable in an employment relationship. Here, formal self-employment effectively serves as a circumvention strategy for the protective mechanisms that legislators have intentionally created to safeguard workers.

The psychological price of uncertainty

Those who derive their income solely from success-based commissions are exposed to considerable psychological pressure that far exceeds ordinary work-related stress. The uncertainty of how much income will actually be earned next month can significantly deplete their mental resources, especially during periods when deals are delayed or fail to materialize for reasons beyond their control. Scientific studies on the gig economy confirm that this form of income insecurity has not only financial but also normatively problematic effects, as it limits those affected's ability to develop and implement long-term life plans. Finding an apartment, family planning, retirement savings, or major purchases become a risky undertaking for people without a reliable basic income—a risk that employees with a fixed salary do not experience in this way.

There's also a more subtle effect: those constantly under pressure to succeed tend to prioritize short-term deals over long-term client relationships. This bias not only harms the freelancers themselves, but ultimately also the companies they work for, because sustainable client retention is often neglected in favor of quick contract closures. The client's short-term economic advantage thus creates long-term structural disadvantages that often only become apparent after a considerable delay.

When leadership is replaced by money

A key argument against the excessive use of commission-based models concerns leadership responsibility itself. Where leadership is systematically replaced by monetary incentives, significant misallocations of resources arise because each employee optimizes the system according to their own interests and does not necessarily act in accordance with company goals. This observation pinpoints the core of the problem described at the outset with remarkable precision. Sales and marketing managers who recruit freelancers on a success-fee basis to avoid operational responsibility themselves are not only delegating a task, but effectively their leadership duties as well. They create a system in which success or failure is entirely shifted to the operational level, while their own position within the company remains untouched, regardless of whether the freelancers they employ are actually successful.

This structure fundamentally contradicts the principle that leadership responsibility should go hand in hand with accountability for results. A manager who hires sales staff on a purely success-based model and bears no financial risk has little incentive to invest in the training, onboarding, or strategic support of these freelancers. Why invest in the development of individuals whose failure doesn't jeopardize one's own position? This logic leads to a structural neglect of precisely those support services that would be necessary for sustainable sales success, such as comprehensive product training, market data, qualified leads, or effective customer relationship management.

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Business fallacies behind the model

Numerous business analyses show that commission-based models often fail to deliver the desired results in practice. Studies repeatedly demonstrate that traditional, purely variable compensation systems in sales often fail to achieve their intended incentive effect and, in certain situations, can even cause significant harm. A key criticism concerns the one-dimensionality of the incentive structure: If only pure revenue or sales are rewarded, important, less directly measurable performance aspects are systematically neglected. Customer care, inquiring about technical needs, systematically gathering competitive intelligence, or building long-term business relationships are not considered in a pure commission model because these activities are simply not compensated.

Another misconception concerns the supposed cost efficiency for the company. While it may seem attractive at first glance to only incur personnel costs during periods of high revenue, significant indirect costs often arise. These include high turnover among freelancers, the loss of established customer and market knowledge when they leave, repeated training efforts for replacements, and reputational damage among customers who are confronted with constantly changing contacts. Poorly functioning commission systems thus become disproportionately expensive in the long run, contrary to the initial cost-saving intention, because the damage caused by incompetence or a lack of customer loyalty regularly exceeds the supposedly saved amount.

The professional ethical dimension of the delegation of responsibility

Beyond purely economic considerations, the professional ethics component of this practice deserves special attention. A manager who knowingly engages individuals without a fixed base income for tasks whose success depends significantly on factors beyond their control is not acting in the interest of fair risk sharing, but rather in the interest of unilateral risk externalization. This behavior becomes particularly questionable when the motivation behind the decision is not primarily based on understandable business necessities, but rather on shielding one's own position, reputation, and fixed salary from any risk. In this case, the formal self-employment of freelancers is instrumentalized to avoid personal responsibility, without the individuals involved being fully informed about the actual chances of success, the structural framework, or the realistic risks.

This practice contradicts fundamental principles of fair cooperation, according to which the party who decides on the terms of a business relationship and possesses the greatest informational advantage should also bear a fair share of the responsibility for its outcome. If, instead, attempts are made to systematically shift all risk onto the weaker party while leaving one's own protection untouched, an imbalance arises that is hardly compatible with fair competition or a partnership. Any manager who acts in this way ultimately prioritizes their own short-term gain over the long-term integrity of the business relationship and the well-being of the people who work for the company.

When performance-based compensation can actually work

This critical analysis does not mean that all forms of performance-based compensation should be rejected outright. In practice, there are indeed functioning models where commission components are sensibly integrated into an overall compensation system. The crucial factor is that the market risk is balanced harmoniously between the contracting parties and that both sides benefit appropriately from the collaboration. Sales consultancies that focus intensively on designing such models often fundamentally reject pure performance-based compensation without any basic safeguards, because in practice it regularly leads to disappointed expectations and financial frustration on both sides.

A functioning model is typically characterized by several features: transparent communication of the actual probability of success, a reasonable base fee that at least covers basic financial needs, a fair definition of the metrics that also considers factors beyond the freelancer's control, and a genuine investment by the client in support services such as training, qualified leads, or technical infrastructure. If one or more of these prerequisites are lacking, the commission model transforms from a legitimate instrument for performance management into a tool for unilaterally shifting risk.

Economic consequences for the companies themselves

The excessive use of pure success-based commissions also has negative medium-term consequences for the client side, which are often underestimated in short-term cost calculations. Freelancers hired solely on a success-fee basis typically become lone wolves, primarily focused on their own sales, while the service aspect, crucial for sustainable business success, fades into the background. This short-term sales orientation often backfires later, for example, when customers leave due to inadequate support or when important market information, which should ideally flow back into the company through direct customer contact, is lost.

Furthermore, this model significantly hinders the onboarding of new sales staff, as their lack of experience means they are rarely immediately assigned attractive new client projects. In the initial phase, they often have to content themselves with maintaining relationships with existing clients, thus missing out on potential business for which other freelancers had previously invested considerable effort. This internal competition can create additional tension within a sales team, ultimately harming the client side as well, since cooperative collaboration is hardly possible under such conditions.

Power asymmetries as the actual core of the problem

From a broader economic sociology perspective, the described practice can be understood as an expression of a more general development referred to in academic literature as the major risk shift. This concept describes the gradual transfer of risks traditionally borne by institutions, companies, or governments to individuals and households. What was previously evident, for example, in the reduction of company pension schemes or state social benefits, also finds its counterpart on a smaller scale in the practice of recruiting freelancers purely on a success-fee basis.

It is telling that this shift in risk is rarely communicated openly as such. Instead, it is usually packaged as an opportunity, flexibility, or entrepreneurial freedom for freelancers. This linguistic reinterpretation obscures the actual power imbalance between the contracting parties, because the power to decide on the contract terms almost always lies with the client, while the freelancers' supposed freedom often boils down in practice to the freedom to accept or reject an economically risky offer without having a balanced negotiating position.

Options for action for fair sales practices

For companies that still wish to benefit from the advantages of performance-based compensation without accepting the described negative effects, several practical approaches are available. A hybrid compensation model with a reasonable base fee and a clearly structured commission component distributed the risk much more fairly than pure performance-based compensation. Additionally, the commission benchmark should be carefully chosen to adequately account for external factors beyond the freelancer's control.

Equally important is honest and complete communication of the actual chances of success before the contract begins, so that freelancers can make an informed decision. Managers who delegate sales processes to freelancers should also assume a minimum level of responsibility for the overall success, for example, by providing qualified leads, functioning sales tools, and ongoing professional support. Only when both sides are genuinely interested in shared success and the associated risks are fairly distributed can a commission-based model achieve its originally intended positive effect, instead of becoming a tool for one-sided avoidance of responsibility.

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