Content

• Steps
• Part 1 of 2: Basic Calculation
• Part 2 of 2: Other Terms

Anyone who is in retail or trade should be able to calculate the commission. Commission work is very common in sales, as well as in various other areas where making money is an important part of the job. Commissions can also arise, for example, when a creditors or a sales representative raises money by dealing with accounts payable.

Steps

Part 1 of 2: Basic Calculation

1. 1 Calculate the commission based on the unit of goods you sold (if your employer uses such a commission payment scheme).
   • The commission is expressed either as a percentage (for example, 30%) or as a flat rate (for example, $ 30).
   • For example, if you sold 5 pairs of shoes at $ 100 per pair, and your commission is 20% of each pair of shoes sold, then your commission would be: 5 (100 x 0.20) = $ 100.
   • Alternatively, if you receive $ 30 on every pair of shoes sold, your commission is: 5 x 30 = $ 150.
   • This is sometimes used in conjunction with other commission payment schemes (described below).
2. 2 Calculate commission based on gross profit or net income (if your employer uses such a commission scheme).
   • To calculate net income, use the following formula: Gross Sales (Gross Profit Before Expenses) - Operating Expenses - Taxes - Interest Payments (if any).
   • Subtract the cost of the item from the net sales to calculate the gross margin. For example, if a car sells for $ 12,000 and has net sales of $ 6,000, then the gross profit is $ 6,000.
3. 3 Calculate commission based on cash receipts (this is the scheme used to attract salespeople to collect arrears).
   • For example, if an employee has collected $ 500 in cash and the item is worth $ 1,000, the employee's commission will be calculated based on $ 500.

Part 2 of 2: Other Terms

1. 1 If an employee sells more goods than he was supposed to, then he gets more commission. Find out if the increased commission rate applies to the entire product sold, or only to the portion that exceeds the specified minimum.
   • For example, the commission rate is 2% if an employee sells $ 50,000 worth of goods, and 4% if they sell more than $ 50,000 worth of goods. If you sell a $ 70,000 item and the increased commission applies to the entire item sold, then your commission will be: 70,000 x 0.04 = $ 2,800.
   • On the other hand, if you sell $ 70,000 worth of goods, and the increased commission applies only to that part of the product that exceeds the established minimum, then your commission will be: 50,000 x 0.02 + (70,000 - 50,000) x 0.04 = $ 1,800.
2. 2 If several sellers participate in the sale, then the commission is divided by the number of sellers. In addition, a regional sales manager may receive a portion of the commission from sellers in their region.
3. 3 Find out if the commission is paid for the sales of the previous period or the current period. Sometimes it makes sense to defer a payment in order to collect all the necessary information to calculate the commission (for example, gross profit, etc.)
4. 4 Please rate any additional bonus options or associated incentives. In addition to direct percentage, the commission structure can also include any number of more sophisticated incentives for the seller or other commission earner.
   • Apply for an excellent work award. If you know that your commissions were the highest in a department or team, ask for a bonus for the best result.
5. 5 Don't forget about taxing commissions. This part of the commission calculation can be extremely difficult. On the one hand, sales reps and other commission-earning people are often taxed at different rates, even compared to their previous annual income. The best way to calculate commission taxes is to look at similar amounts on the payroll.
   • Understand the retention option. The deductions you see on the payroll are the amount that will be deducted from your commission. You need to know these numbers in order to calculate the total after-tax commissions.