Are you considering a commission-based job or you just got into a field where commissions are a big chunk of your compensation and you’re not really sure how it works? Well, don’t be alarmed. Commission can be a confusing topic for anyone, whether you’re great with money or not.
Commission-based jobs 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. When looking for a commission-based career, there are plenty of job options to consider in a variety of fields.
If you’re not sure how it all works in the business world, we’ll break down the concept so you come out a little wiser than you were before.
What is a commission?
A commission is an additional compensation earned based on job performance. When you agree to a commission-based role or commission structure (often by signing an agreement), you agree to be paid a certain amount of money that’s dependent on hitting some goal—goods sold, meetings closed, hires placed, to name a few examples.
When you think of commission, your mind immediately goes to a sales-type role (think of a retail salesperson trying to get you to buy that extra pair of jeans). Commissions are popular in most sales jobs because their responsibilities are heavily tied to a company’s revenue goals. Having the opportunity to earn commissions — sometimes a hefty amount — motivates those individuals to hit or get close to their quarterly or yearly goals.
However, commissions can pop up in other places, too. In recruiting, you’re often provided a commission on each candidate you successfully place—usually a percentage of their annual salary. As an account manager, you can earn commission on clients you upsell or renew for the year. And in real estate, you can get a cut of the money you make selling a property.
In fact, in some roles commission makes up almost all of your compensation, meaning your income is variable and highly dependent on your output.
Types of commissions
There are a few types of commission-based jobs that have different pay structures and calculation methods, including:
- Straight commission. Jobs where employees receive pay entirely based on the sales that they generate.
- Salary plus commission. Careers where employers set a base salary for employees and add commission pay calculated from the sales they generate.
- Salary plus bonus. Jobs where employers set a base salary for employees with the potential for additional bonus pay if they meet high-level goals.
- Variable commission. Compensation structure where employees are paid income deducted directly from sales generated after it is earned.
Since the pay from commission-based roles correlates directly with how well you perform in your role, it can be quite challenging to take home a consistent salary each month. Your salary depends on your level of experience, speciality, employment location and success with clients. However, if you are a top performer in your field or at your company, such jobs can lead to high pay, security and overall career satisfaction.
With the right amount of self-discipline in a commission-based job, you can set up daily or weekly goals for yourself to keep track of your commissions and ensure you’re meeting your personal salary targets.
There is a lot of flexibility afforded to commission-earners—there’s usually no limit to how much you can earn in a commission-based role, meaning you can make as much as you want, even if your company has a commission earnings threshold. While commission-based jobs are popular in the business sales field, you can find jobs that earn commission in a variety of industries, including:
- Finance
- Insurance
- Advertising
- Real estate
- Hospitality
- Information technology
How commission works
Commissions can be calculated by a set percentage or by a formula. As mentioned above, a recruiter generally gets a percentage of the new hire’s starting salary (usually 10 to 20%), while salespeople may have a formula-based commission structure.
For example, in sales, your total compensation could be 50% base salary and 50% commission. So if your total yearly compensation agreement is for $100,000, $50,000 of that is guaranteed for the year and $50,000 is based on how well you perform. You may earn less than the $100,000 if you don’t reach your goal, but you may also be able to earn more than that number as long as your company doesn’t have a cap or “ceiling”—meaning the point at which an employer stops paying you more commission.
There’s also a concept called a “minimum performance threshold” or “floor,” which is common for more senior-level employees. This means that the person must get some percentage to goal to start earning any commission—the understanding being that a certain level of underperformance is unacceptable.
Commission payment works differently at every company, but in general, payment can be distributed monthly, quarterly, or yearly, depending on a company’s structure and when commission is considered “earned.”
For example, a company may define commission “earned” for a salesperson as when the new client signs a contract. This means that the employee who sold the deal won’t get their commission until a signature is collected and the deal is verified (which usually means they double-check to ensure the right salesperson is compensated and the overall transaction is clean and accurate).
If you’re unclear as to how your commission is calculated, talk to your HR or finance departments, or your boss or team lead.
Best-paying commission-based jobs
Advertising sales representative
National average salary: $52,774 + $15,000 commission per year
Advertising sales representatives are responsible for selling advertising space to companies and individuals. They sell online, print, radio and television slots to buyers who want to market products and services on such platforms. Representatives will often work for specific media companies that manage specific platforms, such as a news media organization or a radio network. They interface with clients and internal stakeholders, make pitches, maintain customer accounts, encourage client loyalty, analyze data and make sales presentations.
In addition, representatives must often work under deadlines to meet specific quotas.
Brokers
National average salary: $73,011 + $42,000 commission per year
Brokers work within a variety of industries facilitating large-scale business transactions. They serve as intermediaries between customers and sellers, acting as a third party during a deal’s execution.
Typically, brokers represent either a buyer or a seller of a certain product or service. They are responsible for advising clients on how to make successful business investments regarding real estate, stocks, mutual funds land, insurance and more. Even more, brokers work dutifully to build and maintain their client bases to encourage customer loyalty.
They are also responsible for executing administrative duties, such as preparing financial documents and performing customer follow-ups.
Financial advisors
National average salary: $69,852 + $30,366 commission per year
Financial advisors assess the financial needs of individuals to help them make important decisions regarding taxes, insurance and long or short-term investment options. Advisors interface with clients to understand their financial goals, such as saving for retirement or educational expenses. From there, advisors perform financial analyses and calculations using figures from a client’s personal finances to make recommendations for meeting those goals.
Even further, financial advisors sometimes directly invest their clients’ money and monitor such investments closely to ensure they are lucrative.
Insurance agents
National average salary: $57,294 per year
Insurance agents sell different types of insurance coverage to potential clients. They may specialize in a particular type of coverage, including health, dental, medical, rental, homeowner or life insurance. They also contact potential clients, explain policy details (such as benefits and cost) and help clients decide which plans are best for their needs.
Insurance agents are also responsible for managing client satisfaction, policy renewal and maintaining records of sales or policy adjustments.
Real estate agents
National average salary: $85,398 per year
Real estate agents facilitate the sales of property. They can specialize in either commercial or residential properties, though some agents choose to switch between the two specializations. Real estate agents monitor the market, advise clients on market conditions, conduct showings, provide guidance and advice and assist in the buying, selling and leasing of properties. They work to market their available properties to potential buyers by purchasing advertisements and running marketing campaigns.
Further, real estate agents are often responsible for crafting documentation necessary to execute property sales.
Sales consultants
National average salary: $70,260 + $24,000 commission per year
Sales consultants assess a company’s needs to help them sell products or services to target customers. They meet with clients, conduct research, analyze market statistics, identify existing issues and assess opportunities for strategic intervention. From there, consultants will create marketing strategies to promote such products and advise companies on how to best execute their promotional campaigns.
In addition, sales consultants are sometimes responsible for making recommendations on how to train sales representatives and increase sales within retail locations.
Sales Engineers
National average salary: $107,818 + $20,000 commission per year
Sales engineers sell scientific and technical products to businesses and organizations. They are experts in both sales and engineering and often have training in each field. Sales engineers often consult on product design and how to best market products for scalability. They work directly with clients to increase output and profit regarding technological and scientific products or services, such as programs.
Sales engineers use their analysis capabilities and industry-specific knowledge to guide clients on such matters. They can work in a variety of fields, including production, manufacturing and technology.
Sales managers
National average salary: $79,991 + $15,000 commission per year
Sales managers are leading members of sales teams. They provide guidance, mentorship and training for sales representatives and agents. Sales managers are responsible for setting goals and quotas, and crafting successful sales plans to meet company targets while staying within budget. They do this by monitoring the market, analyzing data, performing calculations and honing the skills of their team to make as many successful sales as possible.
A large part of being a sales manager is building a sense of camaraderie and confidence among sales team members to help them execute their jobs reliably.
Travel agents
National average salary: $49,013 per year + $150 commission per day
Travel agents are responsible for planning, booking and selling travel packages. They take care of most travel planning procedures and source appropriate transportation, accommodations and activities for individuals and groups. Travel agents can specialize in local, domestic or international travel, and they often provide clients with a variety of options to choose from when making their plans. They may offer day trips, weekend trips or longer vacation packages.
Even further, travel agents may work in niche fields to appeal to specific customer bases, such as thrill seekers, environmentalist travellers or corporate travellers.
Pros and cons of commission-based jobs
Pros
You control your income
Since you’re responsible for hitting your numbers monthly or quarterly, your success is literally in your own hands. So if you need to earn some extra income one month to pay for, say, you’ll know to work harder. Conversely, if you are an older worker looking for some supplementary income, you might not have to push yourself as much.
You have your own schedule
For the most part, commission-based gigs are flexible ones. That means that you can set your schedule as you need to facilitate both professional and personal demands on your time. For job seekers looking for work-life balance, a commission-only job can be a great fit.
You might have unlimited earnings potential
The cool thing about some commission-based jobs is that they might not have an earnings ceiling. This means that you can, theoretically, make as much as you want without a limit. And even if the company does have a commission earnings threshold of, say, $200,000, you might be able to exceed that amount in the form of other benefits, such as prizes, awards, bonuses, or the ability to pad next year’s earnings with the overage from what you’re earning this year.
You know how well you’re doing
When you have an office job and are having a bad day, week, or even month, you know that you’ll still see the same amount of money in your salaried paycheck. That’s not the case with a commission-only job, where your take-home amount might vary from month to month—and that can be a good thing.
For workers who want to improve performance and have specific metrics to measure success, having a commission-only gig can show you how well you’re doing—and where you could show some improvement.
You’ll probably work more independently
Commission-based jobs are, for the most part, a numbers game. If you’re hitting (or exceeding) your monthly quotas, your boss probably won’t be probing to see exactly how you’re spending your time. This can be very desirable for someone who wants to work without much interference or monitoring from a boss or manager.
Cons
Your income can fluctuate greatly
The problem with commission-based jobs is that if you’re not selling, you’re not making any money. For someone looking for a steady income week to week, month to month, year to year, a commission-only job might not be 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.
You might be seen as high-risk
Let’s say that you want to refinance your home, or co-sign on your kid’s college loans. By banking standards, you might be seen as a higher risk if you have a commission-only job compared to somebody who has a steady income. In turn, you might wind up paying higher premiums and interest rates.
If this is a concern for you, you might want to consider having a part-time or full-time job, and then using a commission-only job for supplemental income instead.
Turnover rate for your work may be greater
The world of commission-based jobs is pretty black and white. You’re either hitting your numbers—or you’re not. So if you are having problems closing sales or keeping up, it will be immediately evident to both you and your employer. This means that you could potentially lose your job faster than if you had a job that wasn’t commission-only.
You need self-discipline
Some commission-based jobs pay their employees after every few weeks—or months. If you don’t set up daily or weekly goals for yourself, you might find that you work harder when you know that deadline (and your potential paycheck) are impending. That’s why those who choose commission-only jobs have to think of the bigger picture and work diligently, even on days when they aren’t about to get paid.
You have to know how to work remotely
The majority of commission-only jobs are done remotely. If you’re the kind of person who thrives on the camaraderie felt by working with colleagues every day, it might be hard to transition to working independently most (if not all) of the time.
However, between the benefits of working remotely, and the ability to earn what you want, a commissions-only job could work out to be a great job to consider!
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