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Understanding Commission Structures

Commission is a payment based on a percentage of sales. It helps foster a harmonious relationship between employer and employee by serving as a reward for the employee. There are different types of commissions including straight commission based solely on sales, graduated commission which varies based on sales tiers, and salary plus commission which provides a base salary plus additional payment for sales exceeding expectations. Commission can also be paid on an installment basis based on payments received rather than the full sale amount.

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Christian Verdadero
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535 views3 pages

Understanding Commission Structures

Commission is a payment based on a percentage of sales. It helps foster a harmonious relationship between employer and employee by serving as a reward for the employee. There are different types of commissions including straight commission based solely on sales, graduated commission which varies based on sales tiers, and salary plus commission which provides a base salary plus additional payment for sales exceeding expectations. Commission can also be paid on an installment basis based on payments received rather than the full sale amount.

Uploaded by

Christian Verdadero
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Commission

Commission is a payment based on the percentage of sales of an agent. It


will help the employer and employee to have harmonious relationship within
the company. This will serve as a reward for the employee.

Formula for the Commission


Commission Rate (CR) x Total Amount of Sale of the Month (S)

Formula for the Gross Pay for the Month


Commission (C) + Basic Salary (BS)
Examples:
1. Forda is a real estate agent and earns a 3.5% commission on each house
and lot he sold. If he sells a house and lot for Php 2, 500, 000, how much
commission did he receive?
2. Marites is paid a monthly salary of Php 25, 631 plus a commission of 4% of
the profits made by company on the products she sells. How much does
Marites earn in a month with a total sale of Php 78,000?

Different Types of Commissions


1. Straight Commission – is a form of compensation but with no fixed
salary of the agent.

Example
1. Nathalie works in a commission basis company. She received a 3.2%
commission to her total monthly sales. In a month of September, she made a
total sale of Php 275, 650. How much will be her commission?
2. Angelica started to work in a furniture company with a 2.8% commission
basis. In the month of July she made a sale of Php 145, 500. Unfortunately,
the customer who bought a furniture set worth Php 28, 500 returned because
of some defects. How much commission does angelica will receive?

2. Graduated Commission – is a type of commission that the company


gives to their agent not in one but gradual. The commissions received will
depend to the sales.

Example
1. Rocky is an agent with a commission of 5.5% on his first Php 180,000 of
sales during the month and another 1.5% commission on sales above Php
180,000. Fortunately, he has a total sale of Php 195,000. How much will he
earn?
2. Loreta has a monthly commission of 3. 3% on all her total sales. The
company granted her an additional 1% if she exceeds the minimum of Php
75,000. How much will be her total earnings if she happened to reach sales of
Php 105,000?

3. Salary Plus Commission – is when an agent gets a salary on top of the


commission he/ she will gets for every sale that he/she can make.

Example
1. Mr. Chan is working in a company with a salary wage of Php 45, 690
monthly. On top of his salary, he is expected to sell appliances worth Php
7,000. He can get 3% additional commission when he exceeds his expected
sales. He fortunately made a sale worth of Php 13, 900. How much will be his
gross pay?

Commission on Installment Basis


A commission not based on sales, but it is a commission based on the
collection or what we call payments by buyers. Installment means that the
buyers didn’t pay all at once.

Example
1. Mr. Lee works in a cellphone shop that offers him 2.5% commissions on
every sale he can make. He made a sale worth Php 80,000 that can be paid in
an installment of Php 10,000 per month for 8 months. How much will be his
monthly commission? How much total commission he can get?

1. Maribeth works in furniture company. She has been promised of 3.5%


commissions on every furniture that she can sell. For this month, she sold a
cabinet worth of Php 23, 250. How much is her commission for this?
2. Mark’s monthly salary is Php 18, 850. O top of this, whenever he sells an
appliance, he can get an additional of 4/3%. Fortunately, he sold a smart TV
that costs Php 67, 450. How much will be the total gross pay of Mark?

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