What Are Typical Sales Commission Rates for Sales Reps?

Real Estate agents earn commissions when they help people buy and sell property.

Sales representatives earn commissions based on the sales they make. Generally, commission rates are figured as a percentage of the net sale, excluding shipping and other costs. For example, if Jane sold a piano for $3,000 and made a 10 percent commission, she would earn $300 for that sale. According to the Bureau of Labor Statistics, some sales reps get paid strictly on a commission basis, others earn a salary and some earn both.

Determining Commission Rates

Commission rates vary greatly based on the type of industry, item being sold and requirements of the sales reps. Many companies use commissions as a motivational tool to encourage its sales reps to sell as much as they can. Still, companies cannot operate successfully if they are overcompensating their sales reps, so organizations with less overhead tend to offer higher commissions. Furthermore, sales reps with ongoing customer relationship responsibilities tend to earn higher commissions.

Real Estate

In the real estate industry, it is common for both those selling property and those selling loans to take commissions. In other words, both real estate agents and mortgage brokers often earn money on the property sale. According to MSN Real Estate, real estate agents for both property buyers and property sellers typically earn a commission of 2.5 to 3 percent. Mortgage brokers usually take a commission by splitting the earnings from a loan with the companies that employ them. Commission rates for sales reps in the real estate industry also differ by location. According to the San Diego Union Tribune, realtors in the Southeastern and Midwestern states earned the highest commissions in 2004, while realtors in the Mid-Atlantic states made the lowest.

Service-Based Products

Sales reps who sell products that do not have to be manufactured typically make a higher commission rate than reps selling manufactured goods because service products have lower overhead costs. In fact, Rep Hunter reports that sales reps in these industries make between 20 and 40 percent in commission rates.

Manufactured Products

Sales reps selling manufactured products make less money in commissions than those selling services because of the price of manufacturing. According to Rep Hunter, typical commissions on manufactured products is between 7 and 15 percent. For example, TalentMatch.net notes that office equipment sales reps tend to make 9 to 10 percent on commission. According to the Bureau of Labor Statistics, that boils down to a $9.86 hourly wage, which was the median earnings of retail salespeople, including commission, in May 2008.

References

• The San Diego Union Tribune: Data Show Commission Rates for U.S. Sales By Region
• MSN Real Estate: 3 Ways to Pay Lower Real-Estate Commissions
• Rep Hunter: Determining Commissions for Independent Sales Reps
• U.S. Bureau of Labor Statistics: Retail Sales Persons
• SBA and Bank Loan Default Workouts: How to Design an Effective Commission Rate
• U.S. Bureau of Labor Statistics: Sales Representatives, Wholesale and Manufacturing
• TalentMatch.net: Money Talks: Sales Commission Structures In the Office Equipment Industry