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What Is Draw Versus Commission?

Sales people receive a base pay even when business is slow in a basic draw versus pay system.
Artists may work on commission.
A draw is also known as a base salary.
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  • Originally Written By: Tricia Ellis-Christensen
  • Revised By: Alex Tree
  • Edited By: O. Wallace
  • Last Modified Date: 01 November 2014
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Draw versus commission is a form of pay structure in which an employee is paid a base salary (the draw) that is supplemented or replaced by commission when a specific sales goal is met. This gives the salesperson more stability during slower months, when his or her sales don't meet the set goal, while allowing the employee to earn much more when he or she meets or exceeds those goals. There are a number of variations on this type of pay, including paying a percentage of the commission added to the base salary instead of just the commission and whether or not the base is actually a salary or if it is deducted from projected future earnings.

How Commission Works

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Many sales jobs base part of their pay structure on employee commission, which is typically some percentage of the value of each sale. There are many different ways that salespeople are paid, but the two ends of the spectrum are straight commission, in which the person gets no base salary and is only paid when he or she makes a sale, and salaried, where the employee earns a salary and nothing extra. Draw versus commission combines aspects of each; when the salesperson meets or sells more than her goals, all she earns is the commission. When she doesn't, all she earns is the base salary. This method of payment is sometimes used when a salesperson first joins a new company to give her time to build up her base of clients before switching to straight commission.

Variations

Draw versus commission is similar to, but slightly different from, the payment structure known as base plus commission. Though these salespeople may still have sales goals, not meeting them doesn't affect their base pay. Instead, they receive a flat salary plus an additional percentage on anything they sell.

A twist on draw versus commission is sometimes called draw against commission. In this pay structure, when sales don’t earn the employee enough money to get paid the standard paycheck, the company deducts the draw from the salesperson's projected future commissions. For example, if the employee does not make her goals in one month, she is paid her draw of $1,200 US Dollars (USD). In the next month, she does meet them, and her commission payment is $3,000 USD; since she was paid the draw in the previous month, however, she'll only get a check for $1,800 USD — the commission minus the previous draw.

In this case, the employee is working on a straight commission, but is guaranteed a minimum amount of salary from paycheck to 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.

Advantages

There are advantages to draw versus commission methods of payment, though it depends on the exact payment structure. With the more standard method, employees are guaranteed to make a certain amount of money each month, providing them with some level of earning stability. The superior salesperson is rewarded for working hard and exceeding her sales goals. The company also benefits because, if the employee regularly achieves her goals, it only has to pay commission and no base salary.

In sales jobs where salespeople generate their own leads, draw versus commission may motivate people to work harder to make a higher paycheck. Although there are issues outside the salesperson's control, like a bad economy that might mean slow sales, at least there is that draw amount to fall back upon. This can be better than making straight commission if sales suddenly take a downturn, where no sales means no income at all.

Disadvantages

Depending on the product being sold, it may be difficult for a salesperson to meet her goals. A person who works in a retail environment, for example, may not have much control over who comes into the store, and employees are not in control of advertising, the store's profile, or the economy. In some cases, particularly in high end shops, the employees might schedule personal product demonstrations with customers in their clientele book, but meeting the sales goals can still be a challenge, especially if they are not set at realistic levels.

Under draw against commission, an employee who doesn't make her goals for several months in a row may find herself in debt to the company with no easy way to get out. Even if she exceeds her goals regularly, she may find that all of the commission goes toward repaying the draw from the lean months and she's not able to actually earn more money. In some cases, if the salesperson who hasn't regularly met her goals quits, the company may require her to repay the draw since it was deducted from her future earnings. This is not legal in all places, since there are laws in some jurisdictions that say no one can be forced to work without pay, but she may still have to repay any part of the draw above minimum wage.

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Discuss this Article

anon344099
Post 23

I am a massage therapist. I had to go to school for this job and get a license. I am not a salesperson. Is it fair for them to pay me on a draw when I have to sit here for hours if two days I have appointments and one day I don't, then I don't get paid for a day? If one day I have appointments and two days I don't then I only get minimum wage for those clients? Massage is hard work. It seems like either way I'm not getting paid properly. Is this legal?

anon343046
Post 22

Does being a recruitment manager have a potential to succeed in this economy we have right now with a draw/commission structure?

anon342014
Post 21

Is it legal to be a commissioned salesperson, with a weekly draw (loan), while the owners of the store make us do all of the receptionist work, cleaning the store, including public restrooms, decorating, making price tags, etc.? Shouldn't we be paid hourly if this is all expected of the sales people? We were just told that money will be taken from our commission if we do not put in 40 hours a week. Is this legal?

anon332987
Post 20

I currently work on draw and commission for a homebuilder. They pay when the home actually closes but work is actually done five to six months prior. Can they change the pay rate on closed homes, even though work was done five months prior and was based on the correct commission rate?

anon266993
Post 19

How about working an account for seven and a half years and over doubling the size then your boss comes in and takes it back, claiming that you are not doing your job?

anon260468
Post 18

@Comfyshoes: Speak for yourself. In the department that I work for (in a high end department store which will remain anonymous), it is close to impossible to have a legitimate clientele book. Many employees are basically forced to fake it just to avoid being harassed by upper management.

In my department, the expectations are unrealistically high (in this economy) most of the time and because our department is commission versus draw, an excessive amount of unnecessary drama occurs. It becomes war over who is helping the one good sale of the day while everyone else spends their entire shift doing go backs for customers who try on a million things, buy one or two cheaper items and then return them the next week (which is subtracted from our sales for that day.)

We don't get paid non-selling hours when we should (which means that our draw is higher), considering the fact they are always forcing us to attend stupid events before the store opens and half the time when we have to close the store, we do not get out of the building for at least 30 minutes after closing.

Oh - the only point I wanted to make was that clientelleing and sales in general is much less intense than it is in other areas.

anon259456
Post 16

It seems as if my company is "loaning" me the draw/money to live on, only to take back that draw amount from my commission check each month. How does that compute?

anon249456
Post 15

Can someone advise me on how a commission structure (to employees) in a recruitment company works?

anon244213
Post 14

Can my old company come after me if my weekly draw checks are 18K over what my commissions should have been? I have been let go and I know that I didn't earn that much money.

Janet Williams
Post 13

Great information, thanks for posting, it really cleared up a few things for me. --Janet

anon194978
Post 12

I am working draw vs commission. My employer is trying to change the "closing date" to prevent paying me commissions.

anon178072
Post 11

An employer can only make you pay back a draw if it is "a recoverable draw" and in writing from the time that employment started. This is a fact.

anon178071
Post 10

I was being paid a draw against future commissions. There was never any commission plan in writing the entire time I was employed there of which I had asked for on many occasions. After six months, we decided to part ways and they told me my last day was on a Friday (payday) and didn't pay me for my last three weeks of service. I have since filed a wages claim against them because the draw was in fact acting as a salary.

Four days after I left the company, they sent me an e-mail telling me my commissions didn't exceed my draw and still sent me no documentation to support this in any event. My argument is that there never was a commission plan in place agreed on. Any thoughts on how the labor board will look at this one?

anon171021
Post 9

I've worked both kinds of jobs, ones where I get the "draw" salary + commission if I meet a goal, and then I've been paid on straight commission. I would have to say that the draw plus commission is what I like best. Sales is neither predictable nor easy, so having that base salary to fall back on was nice. A.C.

anon155584
Post 8

I am familiar with auto and cosmetic sales. is anyone versed in furniture sales?

anon154641
Post 7

@Facebook_User: When you earn base+commission there isn't a need for a draw then, correct?

Joel Victor
Post 6

Many sales people prefer "straight commission" but some prefer "base pay plus commission" which gives some security to them.

anon109228
Post 4

Yes anon. The employer can and likely will make you pay back draw if your sales did not meet at least the draw amount. Also, most employers will terminate employees for going into draw too many consecutive times. Commission work is not for everyone.

anon97144
Post 3

can an employer make you pay back a draw if your commission sales are less than the draw you received? I live in Indiana and work for a car dealership.

sneakers41
Post 2

@comfyshoes - You are so right. Contacting customers not only exhibits excellent customer service but it commences a relationship with the patron which raises the likelihood of increased business traffic. Because the customer has many choices, a customer’s relationship should be valued above anything else. Sending them a thank you card or asking them about their family other notable things differentiates the retail experience for the customer. Traffic alone does not equate to success, but a customer relationship can.

comfyshoes
Post 1

Great article, but I would add one thing. While it is true that salespeople working in a retail environment are dependent upon walk-in traffic, many salespeople especially in the upscale stores keep clientele books in order to contact patrons regarding special events. Many salespeople even schedule appointments in order to promote a new product or fashion line. This is especially true in the cosmetics industry where department stores continually offer promotions, samples, and free makeovers. For example, if a customer sits at a counter and the representative performs a complete makeover including a skin consultation the representative can potentially demonstrate over fifteen products which substantially raise the odds of the patron buying something.

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