Commission-sales rates vary according to types of sales. The rates are usually based on gross sales revenue, with different commissions for certain sales levels, including fixed-commission rates. It is good to know about the various sales commission structures in order to evaluate whether or not to accept a sales position. Commission rates for performance can be a lucrative and motivating negotiating tactic before and during sales job employment situations. For example, when total gross sales surpass certain sales goals, a sales person’s commission percentages could increase as a merit bonus.

Straight commission can allow for a great deal of control of your income, which can come in handy for budgeting. With straight commission, compensation is based strictly upon a percentage of sales. While it may seem like the most risky arrangement, it is actually the purest of all commission compensation. However, straight commission may not be practical if sales are not possible right away because to a lengthy sales cycle. For example, in the real estate industry, it can take months to negotiate a sale that will provide commission income. One benefit is that as long as sales go well, your job is usually safe. The better your sales go, the more control you have over your standing within a company. Some examples of jobs which compensate on straight commission include loan officers, financial representatives and brokers, travel consultants and many direct-marketing sales positions.

Variable Commission

Variable-commission structures are similar to straight commission. However, in variable commission, the rate increases or goes down depending upon the sales’ circumstances, which are dictated by the economic cycle of a business. For example, certain products sell on a seasonal basis, such as holiday decorations and summer sporting goods. While it may be possible to garner a higher commission on new accounts, larger sales based on total volume over a certain amount of revenue may require an adjustment at a lower commission rate. Real estate professionals and insurance agents are just some of the kinds of employment situations that typically receive variable-commission compensation.

Draw Against Commission

A draw against commission is also like straight commission, except that an employer allows employees or representatives to draw a certain amount of money each pay period to help get the system started. For example, a $3,000 draw earning only $2,000 in commissions will garner a check for $3,000 with the requirement to pay the company $1,000 back from future earnings. Another benefit is that many draws do not need to be paid back if a job doesn’t work out and an employee must leave the company. Virtually any type of sales consultant may draw against commission, which is dependent upon the company’s policy and structure. Some of the more popular ones include those in the advertising sales industry and others which operate from a large scale, including several branches within the business.

Base Plus Commission

The base-plus-commission structure is generally the same as “salary plus commission.” In this case, the company pays a certain salary, called the base, which is the salesperson’s to keep. Above that amount, the company provides a commission according to a mutually agreed upon formula. Many sales groups use this commission combination. A very wide variety of sales representatives receive base-plus-commission compensation, generally including those who serve the public in retail store settings such as book, equipment, telecommunications and mobile-device sales.

Advance Against Commission

Much like the draw-commission structure, the advance-against-commission system is usually an occasional rather than a continual event. Also, it generally does not exceed the amount of commissions already earned by an employee or representative. Professionals in sales at many levels can receive an advance against commission. It is usually offered to cover expenses until commissions arrive. Recruiters and sales and territory managers are just some of the people who generally receive advances against commission.

Residual Commission

Residual commission is one that keeps on paying regardless of whether a salesperson stays with a company. For example, when it comes to insurance sales, a sales associate is entitled, for a period of time, to commissions on clients’ payments on policies that the salesperson sold to them prior to leaving. When your sales work involves a lot of new-account generation, you would be wise to negotiate a residual commission on those new accounts. The justification here is that the reward for selling the account belongs to you; after you leave and the account is maintained, a portion of the income would be yours for a while. Residual commissions are also paid to those in affiliate sales and similar programs.

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