Being offered a commission pay? Here's everything you need to know

If you’re used to working for a standard hourly wage, switching to a job with a commission payment structure can be jarring - intimidating, even. Still, under the right circumstances, jobs with commission payments can be incredibly profitable if you have the right aptitudes, meet the right customers, and negotiate the best terms with your employers. If you’re interested in pursuing jobs with commission pay, it’s important to learn about the following topics:

• What sort of jobs offer commission pay

• Different commission pay structures

• Job skills need to get commissions

• How to tell whether a job’s commission pay is fair or not

The kinds of jobs that pay through commissions

Commission pay is particularly popular in the following businesses:

• Antique Furniture Stores

• Home Remodeling Supply Store

• High-End Clothing Stores

• Car Dealerships

• Travel Agencies

• Insurance Agencies

• Advertising Agencies

• Real Estate Agencies

Companies in general may also offer commission payments to professionals working in positions like these:

• Recruiters

• Talent Agents

• Financial Advisors

• Stockbrokers

• Sales Associates/Managers/Representatives

The common thread between commission-based in-person and remote work careers is that employees are expected to sell expensive products and services to (frequently well-off) clients. Since each individual client transaction is highly profitable, professionals with the right negotiating and interpersonal skills can earn a lot of money if they close deals with lots of clients.

Popular types of commission pay structure

Commission pay structures can take many forms depending on the position you hold or the company you work for.

Straight commission

The simplest, most intuitive commission pay model is the straight commission. Every time you close a deal with a client, you get paid either a fixed amount or a percentage of the total earnings you brought in. You don’t receive any other salary. This kind of commission payment is common in businesses like real estate.

Salary plus commission

Salary plus commission, frequently seen in merchandise-related industries, is a model of commission pay where employees earn a basic regular wage and then earn bonus money for every successful client transaction. Even if jobs with this pay structure aren’t the most in-demand or high-paying careers, your income will be more reliable and less vulnerable to the whims of the marketplace.

Draw against commission

Draw against commission is a particularly high-risk, high-reward model of commission pay. Companies with this pay model offer you an advance paycheck. If the profit from the client transactions you close surpasses your advance pay, you get a bonus payment drawn from the extra earnings. If the profit from your commissions is lower than your advance pay, though, you’ll have to repay your debt to your employers.

Over the course of your career, you might also encounter these niche models of commission pay: 

• Residual commissions, where you earn a regular stipend if a client you worked with continues to patronize your company.

• Graduated commissions, where you receive different tiers of pay based on the number of deals you close with clients and/or the amount of money brought in.

• Bonus commissions, where you’re given bonus pay for exceeding a certain quota of sales.

Soft skills that can help you earn commissions in your job

Jobs with commission pay are often centered around acts of negotiation - persuading a client to accept a specific offer or adjusting your initial offer to better fit their budget. To make a decent living from your commission work, it’s vital you master impressive soft skills that can help you build rapport with clients and reach agreements both sides can be happy with.

Basic customer service skills from retail or technical support positions can work wonders when talking to a client in person on the phone. Patience, positive language, empathy, and a demonstrated willingness to listen can keep clients at the negotiating table. 

Research skills are also important in a commission pay job, particularly the ability to memorize new information on short notice. Whether you’re selling a house, a used car, or an insurance policy, clients will feel more confident about the transaction if you can answer their questions clearly and honestly.

How to make a decent living from a job’s commission pay structure

Jobs with commission pay can be unpredictable in their profitability. Sometimes you’ll be rolling in clients and bringing in commissions by the truckload. Other times, clients might dry up and with them your monthly earnings. In the worst case, your initial commission pay contract may require you to work unreasonable quotas (forcing you to negotiate a better salary range).

How can you tell if a job’s commission rate is fair and/or if it will let you earn the money you need? Here’s a few approaches you can take to address this question.

• If you’re being offered salary plus commission, make sure your base pay is above the local minimum wage and can support your living expenses.

• Research the straight commission percentage offered for jobs like yours. (For example, the average sales employee earns a commission of about 20% to 30%.)

• Research the average number of transactions closed each month by professionals in your career field. Ask yourself if you can hit this minimum quota, then compare the projected earnings from this average to your expenses.

Key takeaways

1. The various models of commission pay are based on the sale of products and services  to clients. The more deals you close with clients, the more money you earn.

2. The three most popular types of commission pay are straight commission, salary plus commission, and draw against commission. 

3. Jobs with commission models of pay generally require excellent soft skills including strong communication abilities, self-discipline, patience, empathy, and a demonstrated willingness to listen.

4. To figure out if a job’s commission pay is fair, research the average amount of deals you can expect to close each month, calculate the earnings, and compare that to your monthly living expenses. Also research the percentage of commission generally offered for your specific type of job.