Commission Basics

Ever wonder how salespeople make money? Commission is the amount earned for making sales, calculated as a percentage of what you sell. For example, if you sell a $10,000 car with a 5% commission, you'd earn $500 (10000 × 0.05 = $500).

Commission rates can vary widely. If someone has sales totaling $550,000 with a 3% commission rate, they would earn $16,500 (550000 × 0.03 = $16,500). Pretty impressive, right?

Some companies use tiered commission structures where the percentage increases as you sell more. For example, at ABC Sales Force, you might earn 3% on sales between $0-500, 4.5% on sales between $501-2000, and 6% on sales over $2001.

Real-World Tip: Many sales jobs offer a combination of base pay plus commission. This gives you some stable income while still rewarding you for your sales success!

Some jobs offer a base salary plus commission. For example, Danielle sells beauty supplies and earns $450 per week plus 4% commission on sales. If she sells $845 worth of products, her commission would be $33.80 (845 × 0.04). Her total weekly pay would be $483.80 ($450 + $33.80).

Combined Pay Structures

Sales jobs often combine different payment methods to create attractive compensation packages. One common approach is hourly pay plus commission, which guarantees income while still rewarding sales success.

Let's look at how this works: Lexie makes $9 an hour selling jewelry, plus she earns 12.5% commission on her sales. During an 8-hour shift where she sells $380 worth of jewelry, she earns two different types of income.

Her hourly pay comes to $72 (9 × 8 = $72), while her commission equals $47.50 (380 × 0.125 = $47.50). Add these together and Lexie's total pay for that shift is $119.50.

Math Shortcut: When calculating commission, moving the decimal point two places to the left is the same as multiplying by 0.01 (or 1%). So for a 5% commission, find 1% first, then multiply by 5.