Sales Commission Structures

Written by Genevieve Hawkins
Bookmark and Share

Whenever you are in an environment where personal sales are important, you may wonder about what type of commission you can get. Sales commissions are usually paid as bonuses for making a certain number of sales, either individually or as a team. They may be a side source of revenue from a job that pays a base salary or the only money given. Increasingly, many companies are moving towards the latter type, only rewarding performance especially at lower rungs of the ladder.

Types of Commission Structures

There are several different variations of sales commissions, which can be defined simply as a percentage of sales in a given framework. These distinctions can be very important to discover if you are leaving a job and trying to figure out the correct compensation for your services, or if you simply want to check the company's figures. When in doubt, always keep detailed records of your sales.

The simplest sales commission is called percentage, and it is based on an employee's individual sales. If you sell five vacuum cleaners for 100 dollars each at a 10 percent commission, you have just made 50 dollars. Related to this is an accumulative percentage commission, in which you get rewarded for selling more. In this model, you might get a 10 percent commission for the first 500 dollars of sales, and a 15 percent commission from then on, for a given time period.

More complex than either of these is a pyramid commission, whereby upper management and other team members may make a commission on the sales of those people around them, in addition to that of the original salesperson. Beyond that, a percentage of profit commission expands further out, tying individual sales to that of the entire company. In this model, one must keep detailed reports, as figures must be trusted from other sources.


Bookmark and Share