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Can you make good money on commission?

Commission-based careers can be very lucrative and exciting opportunities for top performers. If you have excellent interpersonal skills and the ability to meet quotas, starting a job with commission pay might be the right choice for you.

Before joining Fit Small Business, Heather was the Payroll/HRS Manager for a top cloud accounting firm in the industry. Her experience has allowed her to learn first hand what the payroll needs are for small business owners. Employers are also required to withhold payroll and federal income taxes on commissions.

The pros and cons of commission-based pay

Sales and marketing jobs in many industries, such as automobiles and real estate, generally offer commission-based compensation. It can be part of the salary of an employee https://accounting-services.net/what-is-a-general-accounting-system/ or a separate form of income that is paid on a different schedule. That means the more products or services an employee can sell, the higher the amount they receive.

  • Salaries are more suitable for established positions with a high level of schedule and work predictability, whereas hourly is great for fluctuating work demand.
  • Most of these workers receive less than the minimum weekly salary of $684.
  • When you are offered a job with commission pay, make sure that you understand fully all the variables that will affect your take-home income.
  • An hourly employee is paid a rate for each hour they worked for the period and is entitled to overtime pay if they work more than 40 hours in a week.

The only problem is that if you’re not selling, you’re, um, not making any moola. For someone looking for a steady income week to week, month to month, year to year, a commission-only job might not be The Advantages of Paying Commission vs. Salary a good fit. Since your sales can soar (or sink) depending on your overall success and the state of the market, you might become stressed out over being able to consistently earn an income to live on.

Understanding pay transparency: 5 reasons to start talking money

In this type of structure, the percentage of the sales earned by commission will tend to be somewhat lower than that earned by employees working strictly on commission. When companies pay a base salary plus commission, they have more paperwork, might need to pay employees sooner and have higher payroll tax and benefit costs each quarter. To avoid this, businesses that pay on straight commission often offer a higher percentage commission to encourage employees to take this option. When you include any sort of commission income in your team’s pay, you have to make the rules clear. If a salesperson only discovers there’s a cap on commission pay when they hit the cap, they won’t appreciate the surprise.

Salaries are more suitable for established positions with a high level of schedule and work predictability, whereas hourly is great for fluctuating work demand. Meanwhile, commission is ideal for positions that directly impact sales. Some employers decide to encourage teamwork by setting group goals and then dividing commissions equally among team members when quotas are reached. Sometimes commissioned salespeople can earn a residual commission on their clients’ goods and services for as long as the client continues to purchase from the company. This is common in insurance companies, where the salesperson continues to receive a percentage of their clients’ payments for as long as the client stays with the company.