How to Use Commission

Enter Sale Price

Enter Commission rate and press calculate

Commission

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Definition: Commission is the amount of money that is paid to an employee when they complete a task, usually the task being selling a good or service. Commission can be paid as a percentage often called the commission rate, it is possible for commission to be a flat amount for a certain quota.

Commission is often used to increase productivity and known as incentive pay, commission per sale encourages the employee to sell more products. Commission rates vary from product to product, generally for products that are sold easily, the rate may be 1%-5% while a difficult sale may have a rate of up to 30%.

Commission Formula: Sale amount × Commission percentage

Types of Commission Pay

Pure Commission

Where an employee has no base salary and their entire income is based on commission, as this hold risk the commission rate is generally higher then if they have a base salary. This method can be advantageous for highly talented and hardworking sales people.

Base Salary With Commission

This is when an employee is guaranteed a base salary, along with a percentage of sales they make. This method does have its advantage as the employee always having an income as sales is never guaranteed and sales fluctuate over the course of year.

Residual Commission

For certain sales it is possible to earn residual commission, often being the case in insurance companies. They may receive a percentage of their clients payments as long as the client remains with the company.

How to calculate Commission

To calculate how much you will earn from commission lets use an example. We sold \$500 worth of goods for the company and our commission rate is 5 percent. We then plug the values into the formula.
500 x 0.05 = \$25
The commission will be \$25.