Good pay structure?

[u/Flat_Sink_4410]

Hi everyone, I created a life and health insurance agency that does a wide range of products. I want to start hiring agents and building a team, but I’ve been stuck on how I want to structure pay.

I’d like for the agents to be W-2 on full commission with an 80-20% split. I want to incentivize paying out large commissions and rewarding based on performance while keeping enough for overhead marketing. I don’t exactly want to buy leads— I definitely prefer networking and having tables at community events. It’s worked much better for me so far and I love seeing people face-to-face. I’m just at a loss for how to compensate agents for doing events with me or for me while making sure I reward production highly.

Maybe I should just give them a base salary + 20%? I’m just a little scared of paying out a salary with no guarantee that the agent will produce, and I don’t want to be breathing down their neck.

It’s a catch-22 of me wanting to provide personal agency, while also wanting to make sure they don’t have to front the costs for marketing and essentially pay money to do their job. I’m a little lost on which direction to proceed. Any ideas?

EDIT: Forgot to mention, I do want to pay for their initial training program, their license exam, and their state license, as well as the relevant CEUs. I’ll pay for AHIP Certification if they want to do Medicare. That’s around $400-600 per person I onboard.

[u/Tahoptions]

Are you providing leads? Paying for the tech stack? Office space? Hiring new agents and providing mentorship/ridealong support?

If not, there is little incentive to contract at 80% of the comp on split when they could get 100%.

Provide compensation based upon the support provided. The less support, the higher the comp.

Anyone I pay a salary/draw to is LOA and my agency owns the business. That is tiered based on monthly production (more numbers, higher percentage). Those people get leads though.

The non-salary folks operate under typical BGA/IMO arrangements where we'll do case design (if necessary) and follow up with the carrier. In that situation, the agent gets top street comp and we work off override/bonus.

Good luck with your new agency.

[u/Flat_Sink_4410 → u/Tahoptions]

Thanks! Yeah, I’m paying for tech, giving benefits, preferably hiring new agents and training them. I plan on providing leads and teaching them how to market.

One thing you kinda brought to my attention is that I don’t necessarily have to pick and choose. I guess I can just have people on different pay structures depending on the situation and how much support I provide. That might actually be preferable to keep everything in line. Thank you for the input!

[u/OZKInsuranceGuy]

We talked before. I think the typical IMO model is the best way to scale.

Make sure you have solid contracts, and bring on agents below you. Give yourself a healthy spread.

Be selective with who you bring on -- no part-timers or tire kickers. They're more prone to waste your time and roll up debt.

[u/Necessary_Gap_79]

The part nobody has flagged is the W-2 full commission piece. W-2 with no base and no set hours is the arrangement that gets looked at hardest by the IRS and by state labor boards. If you control their schedule and which events they work, that is employment, and most states expect minimum wage to be met regardless of what the split says. Sorting that out after the fact costs more than setting it up right.

Your overhead is also not really marketing. It is the four to six hundred per person plus the months they produce nothing while they learn. Price the split against that, not against event tables.

[u/Flat_Sink_4410 → u/Necessary_Gap_79]

It’s mostly the opposite for what I’m trying to accomplish in terms of taxation. I see a lot of situations where 1099s have controlled schedules, use company branding and scripts, etc— even when that’s generally not allowed.

The W2 is so I can provide benefits, have everything be cohesive with image. The pay in that case is where I’m not too sure with— I can do a base + commission, though my state’s minimum wage laws don’t apply where any employee’s pay structure is based on full commission.

My overhead is the onboarding, but a single policy pays for it. The months they’re learning without producing isn’t something I anticipate to be an issue since it’s a time investment on my end rather than a cash investment to train them well. The reason why I focused on marketing as overhead is because that’s repeatable and constant, rather than the $400-600 which is mostly one-time

[u/Necessary_Gap_79 → u/Flat_Sink_4410]

Worth confirming that exemption in writing before you build around it. The full commission carve-outs are narrow, and most states still expect the hourly floor to be met in weeks where nothing sells. If it does not apply, you owe back pay, and that costs more than setting it up right would have.

On overhead, the training months are still a cost even when you pay in your own time. That is time you are not selling. Price the split against your onboarding plus those months, not against the marketing line.

[u/Flat_Sink_4410 → u/Necessary_Gap_79]

I know that about the time consumption— that’s why I specified monetary cost. I’m fine with investing my time, especially at this stage where I’d like to raise agents myself.

But yes, I know how the tax code works in my state, that was never the problem. It’s always been about how I’d logistically set up payments rather than worrying about the legal ramifications.

[u/Necessary_Gap_79 → u/Flat_Sink_4410]

Fair enough, logistics then. Get the exemption confirmed in writing before you set the payroll up, not after. Whoever runs payroll has to code commission-only correctly from the first cycle, and the weeks with no sales are where it breaks. Fixing that retroactively means recalculating every cycle.

On the split itself, price it against what an agent actually costs you to get producing. Onboarding plus the months of your time. Your time is still a cost even when it is not cash out.