Straight and Variable Commission Pay

Straight Commission with Draw

Companies frequently use straight commission to determine the pay of salespersons.
This commission is usually a certain percentage of the amount the salesperson sells.
An example of one group of companies ceasing to pay commissions is the rental-car companies.

Companies such as Zoho Company allow some of their salespersons to draw against their commission at the beginning of each month.
A draw is an advance on the salesperson's commission. Zoho subtracts this advance later from the employee's commission earned based on sales.
When the commission does not equal the draw, the salesperson owes Zoho the difference between the draw and the commission.

So, basically:
Example: Zoho Company pays Omar a straight commission of 10% on his net sales (net sales are total sales less sales returns). In June, Omar had net sales of $60,000. Zoho gave Jackie a $500 draw in June. What is Omar's gross pay?
Answer: ($60,000 x .10) − $500 = $6,000 − $600 = $5400

Variable Commission Scale

Zoho Company pays some people in the sales department on a variable commission scale. A company with a variable commission scale uses different commission rates for different levels of net sales. Let's look at this case and assuming the employee had no draw.

Example: Last month, Amy's net sales were $150,000. What is Amy's gross pay based on the following schedule?
Variable Commission Scale
Up to $35,000 4%
Excess of $35,000 to $50,000 6%
Over $50,000 8%


Answer: Gross Pay = ($35,000 x .04) + ($15,000 x .06) + ($100,000 x .08) = $1,400 + $900 + $8,000 = $10,300

Salary Plus Commission

Zoho Company pays Henry a $2,000 monthly salary plus a 4% commission for sales over $25,000.
Last month Henry's net sales were $60,000.
Zoho calculated Henry's gross monthly pay as follows:
Answer: $2,000 + ($35,000 x .04) = $,2000 + $1,400 = $3,400


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Date of last modification: March 11, 2019