Sales Representative Commissions

Written by Sandy Mitchell
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Sales Representative Compensation

Sales personnel are generally compensated, in some part, by commission on the sales that they generate. Compensation packages range from 100% commission to a combination of salary and commission. Salespeople may also have the ability to "draw" against their commissions, where a company fronts a new employee a salary against future commissions.

In additional to monetary compensation, employees of a manufacturer are usually offered benefits, such as health and life insurance, paid sick days, vacation pay, tax-exempt child card expenses, for example. Employees have taxes and social security payments deducted from their paychecks. Manufacturers reps and independent contractors are responsible for their own benefits and pay their own taxes and social security premiums.

Sales Representative Commissions

Sales representative commissions vary widely in percentage. Generally, an independent sales contractor makes a higher percentage commission than an in-house sales rep. Commissions are paid on new sales generated. Sometimes commissions are also paid for sales to pre-existing clients, usually at a lower percentage. Deductions are generally made for cancelled sales and returned products.

Commissions may be paid up front, at the time of the sale, or after the sale is completed. Some industries, like cruise sales, pay the salesperson only after the person has used the product--i.e. traveled on the cruise. Depending on the product, there can sometimes be a huge lag time between when a sale is made and when a commission is paid. Commissioned sales people must learn how to save when sales are good for the cyclical downturns that happen in any industry.


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