Base draw + % commission

[freshnesschronic]

Hi.

I just got my first job offer, and am having trouble figuring out how it works. It's an inside sales job, with a base salary draw + 15% commission.

What I think it means, is that there is a standard draw taken out of every commission I make monthly (making 15% of what commission was worth).

Is this correct???

[xoxoxoBruce]

A base salary plus commission at the end of the month, which you can draw against once or twice during the month to live on.

[classicman]

Congrats!
What are you selling?

Typically you get a base salary + 15% on either what you sell or cash paid.
You are better off if it is cash paid - then you needn't deal with chargebacks (when you've already gotten your commission and then they take it away.

Check on how you are getting the commissions paid - what timeframe.
Are taxes being taken out or are you getting a 1099? If 1099 you gotta pay attention to taxes and more. (some employers won't take out for everything and consider you a contract employee - therefore responsible for more)

The other option is that you are getting a regular check - The draw, but it is based upon you selling and then your commission is offset by that amount. This is very typical.

[Guyute]

You should clarify the draw and salary statement; I worked for a guy once who said I was paid salary but it was a draw as he clawed back commission depending on sales.

Typically a base salary plus commission is exactly that; you get paid to show up and plug away, and if sales are over target then you get a cut. If sales are low then shit can hit the fan but your salary should be sacred; you just don't get a commission. Many employers are shits and will try to fudge this, so get it alllllllll in writing.

If a draw is involved it isn't salary as it is based on historical performance (car salesmen usually are an example). You get paid an agreed-upon figure and periodically that figure gets adjusted based on performance.

[Pico and ME]

Draw is paid when you didn't earn enough commission to cover it, and is paid back from (or taken out of) future commissions. Basically it sounds like you are 100% commission.

[classicman]

In a sense that is correct Pico. Its usually not that simple though

[freshnesschronic]

Lets just fudge these numbers:

Say commission is $30,000 base salary.
The draw is $2,500 monthly. This means that I'm given a check for $2,500

So say in one month I sell $30,000 worth of sales, 15% of that is $4,500. So do I subtract the $2,500 from that $4,500, so is my commission for the month $2,000? On top of my weekly base salary paycheck?

[xoxoxoBruce]

Say commission is $30,000 base salary.

No, base salary and commission are two entirely separate things.

If you are doing a draw, I doubt if you'll get weekly checks, a draw is an advance against your total pay, salary & commission, at the end of the month.

[Pico and ME]

This is the way I understand draw. Normally, draw is just a guarantee that you will receive a minimum pay if you don't earn enough commission. In your example, say you only sold enough to earn $2,000, the company still pays you $2,500, basically covering the $500 you didn't make. However, next month if you earn $4,500 in commission, the company will keep that $500 difference and only pay you $4000.

[xoxoxoBruce]

The answer is, only you future boss knows for sure. You better ask.

Draw versus commission generally works in the following way. The employee is paid a flat fee or bottom line salary for his/her work. In retail positions this salary is usually close to minimum wage. In order to boost the salary, employees are given sales goals to meet within a specific time period. If they meet or exceed these sales goals, they are either paid in straight commission, which is more than their draw salary or base salary, or are given a percentage of their sales on top of their draw salaries. When an employee fails to meet sales goals, he or she is merely paid their draw amount.

This payment is a slightly different tactic than one where people are given base pay plus commission. Though these salespeople may still have sales goals, not meeting a goal doesn’t affect pay. Instead they receive their flat salary plus a percentage on anything they do sell. With draw versus commission, usually the only way to make a higher salary is to meet or exceed your sales goal so that you’ll get paid more than your draw rate.

An interesting twist in draw versus commission is that some companies draw an employee’s salary against future commission. When employees do exceed their sales goal, they’re paid a commission, but their salary in the past has been drawn on this commission. So salary may not be much higher from week to week.

What’s really occurring here is that the employee is working on a straight commission, but is guaranteed relatively the same salary from paycheck to paycheck. When sales don’t earn that employee enough money to get paid the standard paycheck, companies deduct these earnings from future weeks where the commission amounts on sales earn the employee more than the standard paycheck. In order to make more money in this system, the salesperson has to consistently sell above the draw level to make sure future paychecks won’t have commission deducted from them.

There can be advantages to draw versus commission methods of payment, though the more unusual one just mentioned should be considered a straight commission job. With the more standard method, draw versus commission guarantees employees will make a certain amount and rewards the superior salesperson for being able to exceed sales goals. Unfortunately, in the retail environment, where this payment method may be tried, employees don’t usually have control over how much traffic enters their stores. You can only sell things if people actually come into your store, and you’re not in control of advertising, store profile, or the economy.

[TheMercenary]

Man that sounds complicated and allows a chance for an employer to screw you. Only the employer knows the numbers so you would always be taking his word for it that everything was on the up and up.

[ZenGum]

Congratulations on landing your job!

Apart from that, what Merc said. Keep your eyes open and your expectations modest.

[monster]

What are you going to be selling?

[Shawnee123]

Weed.

Good luck.

[classicman]

Be careful not to confuse salary with draw.
A draw is basically an advance against expected sales commission.

Try it this way -
Your draw is $2,500 monthly. you are given a check for $2,500 each month.

So say in one month I sell $30,000 worth of sales, 15% of that is $4,500. So do I subtract the $2,500 from that $4,500, so is my commission for the month $2,000? On top of my (weekly) base salary paycheck?

Yes this is typically the way it works in most cases.

Originally Posted by Pico

say you only sold enough to earn $2,000, the company still pays you $2,500, basically covering the $500 you didn't make. However, next month if you earn $4,500 in commission, the company will keep that $500 difference and only pay you $4000.

You also need to be aware of when commissions are calculated and paid. They can be monthly/quarterly.... They also may not pay you immediately. Commissions may be calculated on "cash in" - meaning they are based upon what is paid for not "sold."

You really need to know and understand all of this. Some companies are pretty shitty.

Also are you an employee or an "independent contractor"? If you are the latter, YOU are responsible for a lot more of your tax liability and I believe have to file quarterly. This affects your actual net earnings at the end of the year.