A commission is a fee that a business pays to a salesperson (agent) in exchange for his
services in either facilitating, supervising, or completing a sale. The commission may be based
on a flat arrangement or as a percentage of the revenue generated by a salesperson. In other
words, commission (remuneration) is a form of payment to an agent for services rendered. Four
Different Types of Commission
1. Straight Commission, also called as Revenue Commission This is a form of salesforce
compensation. In this, no fixed salary is paid to the employee. Instead, the salesperson is paid a
percentage of the total sales he/she has achieved. It is a measure of his/her performance,
rather than the number of hours put in at the job.
Examples: 1. Mike receives 20% commission on the appliances he sells. If he sell a TV for
₱7,000, a refrigerator for ₱12,000, and a heater for ₱1,500, how much does Mike make in
commission? Solution: Total sales = ₱7,000 + ₱12,000 + ₱1,500 = ₱20,500 Commission =
₱20,500 x 20% = ₱20,500 x 0.20 = ₱4,100 2. A salesman sells a used car for ₱95,000. His
commission rate is 4%. What will be his commission for the sale? Solution: Commission =
₱95,000 x 4% = ₱95,000 x 0.04 = ₱3,800
2. Salary plus Commission A commission in which a salesperson gets his basic salary and a
percentage of whatever sales he makes. Examples: 1. Joshua decides to work for another
company that will pay him ₱2,000 per week and 10% commission on sales above ₱20,000 for
the week. If he sold goods worth ₱26,000, what is his gross pay (salary plus commission)?
Solution: Amount of goods sold above ₱20,000 = ₱26,000 – ₱20,000 = ₱6,000 Commission =
₱6,000 x 10% = ₱6,000 x 0.10 = ₱600 Gross pay = ₱2,000 + ₱600 = ₱2,600 2. Maria, a
computer salesperson is paid ₱5,350 per week plus a commission of 8% of the profits made by
the company on the computer that she sells. How much will she earn in a week if ₱15, 000 profit
was generated by her sales? Solution: Commission = ₱15,000 x 8% = ₱15,000 x 0.08 = ₱1,200
Gross pay = ₱5,350 + ₱1,200 = ₱6,550
3. Graduated Commission A commission, which varies according to how much sales is made.
Graduated commission is commission that has a structure that gradually increases as you sell
more. You reach certain levels and you can make more money. Examples: 1. Charles works for
a company that pays him 2% on the first ₱20,000 sold, 3% on the next ₱30,000 sold and 5% on
all sales beyond ₱50,000. What is his gross pay if he sells ₱60,000? Solution: First commission
= ₱20,000 x 2% = ₱20,000 x 0.02 = ₱400 Second commission = ₱30,000 x 3% = ₱30,000 x
0.03 = ₱900 Third commission = (₱60,000 – ₱50,000) x 5% = ₱10,000.00 x 0.05 = ₱500 Gross
pay = ₱400 + ₱900 + ₱500 = ₱1,800 2. A real estate agency receives 2% commission on the
first ₱1,000,000 of a sale and 3% on the remainder. How much commission is received on the
sale of a ₱2,800,000 property? Solution: LONG METHOD: Commission 1 = ₱1,000,000 X 0.02
= ₱20,000 Commission 2 = (₱ 2,800,000 – ₱1,000,000) X 0.03 = ₱1,800,000 X 0.03 = ₱54,000
Total Commission = ₱20,000 + ₱54,000 = ₱74,000 SHORT METHOD: Total Commission =
(₱1,000,000 X 0.02) + [(₱ 2,800,000 – ₱1,000,000) X 0.03)] Total Commission = ₱20,000 +
(₱1,800,000 X 0.03) Total Commission = ₱20,000 + ₱54,000 Total Commission = ₱74,000
