An employee working in the sales department of a company is provided with a base salary. However, as an incentive, the company provides the employee with a sales commission. This commission is basically a sum paid to the employee, other than their base salary, that made the sale.
A sales commission calculator helps generate the figure to be paid as commission to the employee in exchange for selling a product or service.
The calculation of commission depends on the policies of the company. These policies vary from company to company. For example, some companies pay specific amounts of the fee as commission depending on the number of products or services sold such as 8% of sales for 10 products or services sold over $30.
Other companies have set percentages that when reached, a set sum of the commission is paid to the salesperson for example if the sales percentage exceeds over 30% of the number of products assigned to the salesperson, they will be rewarded with a commission fee.
There is a set figure for the sales commission that is paid to an employee for every sale they make. For example, if an employee sells a product for $1000, with the sales commission rate to be of 5%, then the employee is given $50 for every sale they make. This approach is used by companies to motivate the employees to create more sales of the product or services of the company and generate more income.
Other than the number of sales made, the commission can also be set on the basis of the net profit or the gross margin of the product or service.
The managers of the company can also decide commissions based on the profitability of products and services. For example, a product or service generating 6% more profit than other products will have a higher commission rate. This gives the salespeople an incentive to sell the more profitable product or service.
The commission fee is based on the number of sales the salesperson makes. The base salary of the employee is a separate figure. The commission fee is calculated according to the policies of the company and the sales of the salesperson.
The base salary is of the fixed amount while the commission fee varies according to the sales made, therefore, the salesperson’s salary varies from month to month.
The salespeople are also provided with bonuses for any extra sales they generate. For example, after a salesperson has sold the number of products or services provided to them, any further sales are categorized as extra sales and the salesperson is given a bonus commission. The company provides the sales commission as an incentive to derive the employee to work hard and generate sales.