There are many jobs, such as real estate agents, car salesmen, insurance agents and brokers, that pay employees on a commission-only basis. This means they get paid only if they make a sale. A commission is a fee the employee makes when a sales transaction has been completed. Commission rates are usually expressed as a percentage of the sale. You can calculate the commission rate if you know the amount of the sale and the commission amount.
Things You'll Need
Find out how much the sale transaction was for. You will need to know the exact amount of the sale, which means other costs and expenses not related to the sales commission have to be taken into account. The sale amount could be reduced by expenses before the commission is calculated. A sale of $10,000 will earn a salesperson a commission based on a percentage of the sale. Commissions are usually not paid until the sale has been finalized, which means the customer has signed any documents and taken possession of the merchandise or service.
Determine how much a salesperson has been paid in commission. For example, if a salesperson receives $600 based on a $10,000 sale, the commission rate can be calculated using a simple formula. Having the actual figures instead of estimates makes it easier to calculate the exact commission rate.
Divide the amount of commission by the sale amount. Take $600 and divide it by $10,000 to get the commission rate. The result is 6 percent, which is .06 expressed as a decimal. (This figure is converted into a decimal by dividing 6 by 100.)
Tips & Warnings
- Sometimes a commission rate can change based on the amount of the sale. You could receive more or less commission depending on whether the sale is more or less. For example, if the commission rate is 6 percent for sales up to $10,000, it may decrease to 5 percent for sales greater than $10,000. Each company will probably have its own commission structure.
- Many companies pay employees a salary in addition to a commission.
- In some cases, a commission rate can be so low that a salesperson must make many sales before realizing a substantial commission.
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