What Is Commission Pay? (With Types and Sales Skills)

By Indeed Editorial Team

Updated 12 January 2023

Published 31 August 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Commission pay is a type of income that is based on job performance and hitting certain goals or targets, such as getting a sale or getting a new client to sign up. Commission pay varies and this model of payment structure is common in sales, real estate, recruitment and more. If you're starting a new role that is paid on commission, it's important to understand how commission works and what you can expect to earn. In this article, we'll look at what commission pay is, how commission pay works and which careers and industries use commission-based pay.

What is commission pay and how does it work?

Working on commission can be a great incentive for some individuals, providing an opportunity to earn far more than a basic salary based on an excellent performance. If your pay is solely based on commission, it is crucial to stay motivated, dedicated and enthusiastic as every client interaction matters. If you're applying for a job that pays on commission, it's important to look out for the minimum basic salary, as the advertised salary might include projected commissions. Some of the benefits of a commission-based job include:

  • Ability to control your own earnings

  • Defined career path

  • Uncapped earning potential

  • Sales incentives

  • Company benefits like holiday buy-back schemes and international holidays

  • Fast-track career progression

  • Targets and goals to work towards

  • Bonus commission payments

Types of commission pay

There are different types of commission pay, including salary plus commission, straight commission and graduated commission. For many individuals, working on commission can be a good way to maximise earnings and improve basic salaries, but it's important to understand your specific commission pay and which criteria you need to meet to ensure there are no surprise delays with your payment. There are a variety of commission-based jobs, meaning that if you want to work on this basis, you may wish to specialise in a certain industry, such as pharmaceutical sales or insurance.

Salary plus commission

In most roles, a salary plus commission payment structure is common. This means employees have a guaranteed basic income, which they get regardless of how many sales they make or their performance. This is then increased through commission, which a company calculates based on how much the employee has sold. This can be a good middle-ground for individuals who want the ability to earn more based on their own achievements but still have the security of a guaranteed basic income.

In salary plus commission roles, it's a good idea to look out for some key phrases to make sure you apply for a role that allows you to earn more whilst getting a base salary. Phrases to watch out for include:

  • Generous uncapped commission scheme

  • Unlimited earning potential

  • Competitive-based salary

Related: Salary negotiation.

Bonus payments and commissions

Bonus commissions are separate from commission pay and are extra incentives for team members who have over-achieved or exceeded their sales targets. This is often seen in senior roles if a company has experienced growth during the last year or for sales executives who have managed to successfully meet their targets month on month. Bonus commission is commonly awarded to everyone in the workforce at Christmas or after big company success, but companies aren't obligated to pay it. Many companies give their staff a bonus to motivate them even if they have already achieved their sales targets.

Related: What average annual pay rise can you expect?

Straight commission

If you work on a straight commission basis, you only earn based on your commission, which can be a good option for workers who prefer a more flexible approach. As there is no guaranteed basic salary, earnings are entirely based on your performance, which is a good motivator. This may also mean that you need to plan your finances well in case of quiet times of the year or if you have to take a leave of absence. In many companies, commission is paid out three months or more after employees achieve their goals, spreading out their earnings safely.

Related: Commission only jobs on Indeed

Residual commission

Residual commission is a bonus received when a client makes their first purchase and is a common structure in insurance and estate agent companies. This is a popular type of commission pay which is useful if there is no steady income as the employee continues to make money after the initial customer interaction. This works because the client is continually paying a fee or monthly payment towards their policy or purchase. This also continues if you choose to leave the company.

Graduated commission pay

Graduated commission pay helps to distribute commission according to how many sales a team makes. There are different levels, so the commission earned is usually determined by an employee's performance over time. This incentive allows companies to reward high-performing individuals with even more commission if their performance continues to improve. For example, new starters in a company might expect a sales commission of 5%, but over time, the employees who make over a certain amount every month could expect a commission of 15%.

How does commission work?

The commission structure works by paying team members an incentive when they achieve a certain goal or make a deal for the company. There are different ways to calculate commission, so it's important that you understand how commission works in your company and what payment structures, bonus schemes or commission caps might be in place. In some roles, it may take a while for the commission to appear in your wages. For example, some recruiters might only get paid commission if the individual they hired stays with the company for three months.

Commission pay examples

It can be easier to understand what is commission pay based on real-world examples. Example: If you're working for a furniture store as a sales associate with a basic salary of around £17,000, you can expect target earnings of £30,000 a year based on your performance and how much commission you make. If you make a sale of a sofa costing £1000 and get a 10% commission, you'll earn an extra £100 on top of your salary. If you manage to do this every day, or several times a week, the commission can quickly add up. You may also receive incentives on top of your basic salary such as a bonus payment if you achieve monthly team sales targets.

Example: If you are working in an entry-level recruitment role, you can expect a basic salary of around £18,000. However, because of commission pay, high-performing candidates can expect to earn £35,000 - £40,000 in the first year and £50,000 - £60,000 in year two. Of course, this is a projected earning and can vary based on individual performance, but the commission payment could be over £22,000 in the first year. With an average salary of £23,980 for recruitment consultants in the UK, commission can make a huge difference to your earnings.

Related: Writing a CV for recruiters

Maximising your commission

Commission can also be a less formal arrangement between staff and the company, with an agreed-upon commission structure that everyone on the team is aware of and works towards. This can be great for competitive sales environments, however, it does come with a certain amount of pressure and can require individuals to go above and beyond to make a sale. For example, people may feel compelled to make an international sales call in a different time zone or make sure they are available to prospective clients at weekends or during holidays.

What careers involve commission based pay?

Commission-based pay is common in many sales roles, especially in areas where large purchases, such as a property or car, are possible. In many of these roles, team members can expect a commission of around 5-10% which can translate into impressive real-world earnings. It's also a common practice in the property sector and in many tech-based sales roles. Some of the professions which most commonly use a commission payment structure are:

  • Estate agents

  • Sales executives

  • Property investment consultants

  • Brand ambassadors

  • Recruitment consultants

  • Sales associates

  • Stockbrokers

  • Account managers

  • Online influencers

  • Lettings negotiators

Skills needed for commission based roles

If you're applying for a commission-based job, there are a range of skills and character traits that you can develop throughout your career. If you are working on a commission basis, you may also need to be more flexible with your working hours and available at weekends or evenings to boost your earning potential. Commission-based jobs are best suited to individuals who are:

  • Motivated

  • Organised

  • Flexible

  • Able to work under pressure

  • Enthusiastic

  • Negotiators

  • Problem solvers

  • Results-driven

  • Competitive

  • Excellent communicators

Related:

  • What is Sales Commission? Plus Commission Agreement Template


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