Commission is a huge perk for salespeople who appreciate an uncapped earning potential and clear metrics of success. Commission structures are also a motivating factor that give salespeople some independence, help them reach on-target earning (OTE), and help managers meet goals month over month.
The average commission rate for sales sits somewhere between 20% and 30% of gross margins, but this depends on the sales structure. Some workers may earn their whole salary through 100% commission, while others earn 10% on top of a base salary.
Average sales commission rates by industry also vary depending on an employee’s specific role and experience. With so many factors, it can be difficult to nail down true averages. However, we’ve estimated typical sales commission rates using Glassdoor salary data to help you decide what fits your budget and maintains a competitive edge in the hiring pool.
Advertising Sales
$97,860
Performance-based
Base salary
Industry
Performance-based Rates
Base Pay
Additional Pay*
Median Salary
Advertising Sales
32%
$66,488
$31,373
$97,860
Architecture Sales
37%
$76,744
$36,581
$113,325
Auto Sales
30%
$80,980
$35,524
$116,503
Financial Sales
32%
$72,921
$35,485
$108,406
Insurance Sales
33%
$68,637
$33,252
$101,889
Real Estate
28%
$97,303
$38,784
$136,086
Retail Sales
36%
$44,949
$25,166
$70,116
Pharmaceuticals Sales
35%
$78,688
$41,475
$120,163
Software as a Service (Saas)
32%
$79,356
$37,702
$117,058
Telecommunications Sales
35%
$55,236
$29,519
$84,756
Travel Agents
35%
$39,029
$21,233
$60,262
Wholesale Sales
34%
$66,863
$34,490
$101,353
*Additional pay includes performance-based compensation such as commission, bonuses and profit sharing.
What Are Commission Rates?
Commission rates are a set percentage or dollar amount of a gross sale that is rewarded to a salesperson as part of their compensation.
Entry-level salespeople may enjoy a 5% commission rate of the cost of every item sold on top of their base salary. More experienced salespeople or those in high-end industries may earn 100% commission for sales without any supplemental base pay.
Ultimately, commission rate and total annual salary vary based on commission structure and the salesperson’s experience.
Average Sales Commission
Because there are so many variables, there’s no true average sales commission rate. However, many agree that 20%-30% is a typical range for sales representatives. Most companies pay a base rate (either by the hour or as an annual salary) in addition to the salesperson’s earned commission.
Commission rates go as low as 5%, though these companies typically offer significant base rates. Sales commission may also vary considering these factors:
Total sales volume: Surpassing quota expectations could earn higher commission rates for additional sales.
Seniority and experience: Entry-level professionals may earn a lower rate with a larger base pay than experienced salespeople who can better meet sales goals.
Difficulty and length of sale: Difficult industries or products take more time and relationship-building to convert, meaning fewer sales elsewhere, and should earn higher wages accordingly.
If you’re not sure how fair your commission structure is, commit to industry research and compare employee costs to their value. Reviewing employee satisfaction and exit interviews can also clue you in to your employees’ feelings and how you can better meet their needs to retain a quality team.
How Much Do Sales Reps Make?
Sales representative salaries aren’t so straightforward. A salesperson’s total potential earnings may be represented as on-target earnings (OTE), which is the sum of an individual’s base pay and entire commission earnings if they always hit sales quotas. Since commission earnings are based on performance, actual pay can vary.
Both commission and base rates depend on a number of variables, and managers should consider these factors when setting their rates:
Industry
Product or service
Experience
Commission structure
For example, travel agents earn a median $60,000 a year, and 35% of that pay is earned through bonuses, commission, or tips. On the flip side, real estate agents earn over $136,000 a year, but just 28% of that is performance-based pay.
Real estate agents can’t sell as many homes as travel agents can book vacations, but the value of the average home is huge compared to a tropical vacation for four. So real estate agents earn a fair base pay to accommodate the time between sales, and earn a much larger commission from the value of a home.
Experience and seniority in the industry also play a strong role in determining pay. Experienced employees likely don’t need as much training to begin selling productively. Because of their knowledge and independence, you can hire them with confidence that training won’t exhaust your management team.
Additionally, they’re usually more confident salespeople. They can earn more sales more quickly, supplementing their own pay with a higher commission rate than an entry-level employee that will need training to work up to the sales floor and will likely be compensated with a higher base rate.
What Are Sales Commission Structures?
There are 10 basic sales commission structuresthat identify the balance between base pay and performance-based compensation.
100% commission: Your entire salary relies on sales success without a base rate.
Base salary + commission: Employees earn an hourly or salary pay as well as a set commission rate for sales.
Tiered commission: Commission rates increase once a specified quota is reached.
Revenue commission: Commission is based on product cost.
Gross margin commission: Commission is based on a percentage of the sale’s profit.
Commission draw: Employees earn an “advanced” guaranteed pay that can be increased once they earn at least that amount through commissions.
Residual commission: Commission is earned through existing accounts generating revenue.
Territory volume: Commission is split among a team within a shared region based on sales volume and revenue in the territory.
Multiplier commission: Additional commission rates are multiplied by a set modifier once initial quotas are met.
Most salespeople want to earn commission to support their financial goals, while base rates provide a safety net for slow months or economic turmoil. Finding the right balance for your team is integral to attracting and retaining great employees.
Sales Commission FAQs
Sales commissions can be based on dollar amounts or profit percentages, and are paid out with a salary or offer modifiers for smashing sales goals. There are many factors that can make identifying the best sales rate for your team overwhelming.
Below are some additional insights to help you pay your salespeople every penny they’re worth.
Is 15% Commission a Lot?
A 15% commission rate falls short of the typical 20%-30% range and of the performance-based rates we identified for key sales roles. For many experienced salespeople, 15% is a lower commission rate.
Employers can supplement a low commission rate with higher base pay and multipliers or tiered commission rates to encourage employees to exceed sales goals and earn the difference. Long term, however, this may not be an attractive option for senior employees.
What Is a Reasonable Commission Rate?
A reasonable commission rate depends on the base salary offered, the value of the sale, and the time required to close a deal. A range of 20%-30% is most often cited as a reasonable commission rate. The average salary-to-commission ratio in the U.S. sits at 60:40.
Industries that require significant client education and relationship-building, like architectural sales, should earn higher rates than industries that have high quotas with relatively quick turnarounds, like insurance.
How Do You Determine a Fair Commission Rate?
Determining the right commission rate for your team is a balancing act that requires a little bit of research upfront. First, determine:
What competitors are paying
The average time it takes to close a sale
How much relationship-building and hands-on effort is required to close a sale
How pay should vary by the product/service’s cost
How geography factors into compensation
In addition, you should consider your company’s current pay range and employee satisfaction. If entry-level and experienced salespeople are working within a similar pay range, you’ll want to boost rewards for top performers.
If you’re struggling to find new talent, you may increase your base rate to recruit better. If your team is struggling to meet sales goals, consider additional incentives with different sales commission structures.
A mix of external and internal research can show you where you’re over- or under-compensating employees so that you can keep a strong team without sacrificing sales goals or your business’s growth.
At the end of the day, your team comes to work to make a living and you pay them for their efforts that contribute to your business’s growth. To ensure you’re attracting new hires that want to help you thrive and providing them the compensation they deserve, it’s vital to stay up to date on sales commission rates by industry and cost of living expectations as they evolve.
Are you preparing for a hiring push? Help new hires succeed with our outreach masterclass, covering everything from attention-grabbing subject lines to email analytics.
Working with a 2% commission realtor is a good option for most home sellers. Brokerages that offer 2% listing fees typically provide the same level of service as realtors who charge standard 2.5–3% commission rates.
However, the typical commission rate for sales starts at about 5%, which usually applies to sales teams that have a generous base pay. The average in sales, though, is usually between 20-30%. What is a good commission rate for sales? Some companies offer as much as 40-50% commission.
Commission is compensation paid to an employee for conducting a piece of business, and it can be either a total or partial form of compensation. Types of commission include straight commission, salary + commission, and bonus commission.
Most B2B companies at scale end up roughly with a 10%/10% model. Sales reps make about 10% of their quota in base and 10% in commission. With their quota 4x-5x their “OTE” (base + commission).
Because there are so many variables, there's no true average sales commission rate. However, many agree that 20%-30% is a typical range for sales representatives. Most companies pay a base rate (either by the hour or as an annual salary) in addition to the salesperson's earned commission.
No. In fact, many realtors charge less than the standard 3% listing fee. The average real estate commission rate in 2022 is 5.37%. This fee is split between the two agents — often down the middle — which means each realtor earns around 2.72% of the sale price on each transaction.
The industry average for sales commission typically falls between 20% and 30% of gross margins. At the low end, sales professionals may earn 5% of a sale, while straight commission structures allow a 100% commission.
Sales commission rates range from 5% to as much as 50%, but most companies pay between 20-30%. To find the right fit that aligns with your sales goals, start by estimating how much it would cost to hire people under different sales commission structures—both for full-time staff and independent contractors.
What is a typical commission? The typical commission depends on what is being sold. For manufactured goods, the commission rate tends to be around 7-15% of the sale value. The commission on services tends to be much higher, being between 20 - 50%.
The base salary plus commission plan might be the most conventional commission structure. With this plan, salespeople get a base salary with commission. The standard salary to commission ratio is 60:40, with 60% fixed and 40% variable.
One of the simplest and most commonly used sales commission structures is variable pay as a percentage of a single sale's revenue. Under this incentive structure, reps earn a flat percentage for every sale.
1. 100% Commission. In a straight commission plan, the only income sales representatives earn comes directly from their sales. The biggest positive for sales reps is that it provides the highest earning potential.
The most popular compensation model is one that's around 50% salary/50% commission. This is especially common for “hunting” roles that require new business development. A higher base and lower commission is the norm for “farming” roles, in which the rep's main focus is growing existing client revenue.
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.
One alternative to the tip is the commission. Essentially, the employer rewards the employee for past sales. That is, the commission is paid after a time lag which allows the customer an opportunity to cancel the sale before the employee is rewarded.
To calculate the payable commission, multiply the sales revenue by the sales commission rate. A 10 percent commission rate on a $10,000 product deal would pay $1,000 in commission.
Commissions provide that; the better you're doing, the more you earn. Employees may like that their pay isn't based on just being on the clock. There's no need to fill hours with busy work. If they earn a big commission, they can take a break with no loss of income.
WHAT IS A 100% COMMISSION STRUCTURE? In a commission-only structure, the sales rep receives earnings directly from their sales. Most companies do not place a commission cap on commission sales – so it fosters the allusion for new hires that they can earn a higher income.
While salespeople go out and sell the product (either in the field or remotely), the sales operations team supports them with data analysis, strategy, and sales compensation and commissions. One or more individuals on this team may be responsible for sales commission calculations and reporting.
[ko-mish-in ray-t] A commission rate is the reward or payment associated with either a percentage of sale or payment. In partnerships, partners can earn commission on either qualified leads or on closed sales. The commission rate is the percentage of the value of that lead or sale that is paid to the partner.
Commission refers to the compensation paid to an employee after completing a task, which is, often, selling a certain number of products or services. Selling products or services is challenging. Professionals who are into sales and marketing deal with tough competition.
The commission is usually based on the total amount of a sale, but it may be based on other factors, such as the gross margin of a product or even its net profit.
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.
This is one of the most common sales commission structures because it puts an equal amount of responsibility on sales reps and the companies that employ them. Companies invest in reps, regardless of their performance, via the rep's base salary.
A commission split is the percentage that real estate brokers and agents receive when they aid a seller or a buyer close on a house or property. Usually, a real estate commission split can be anywhere from a 50/50 to 70/30 split.
Sales commission caps are typically used to control spending. In most cases, this limit arises because companies fear paying out more on compensation than a rep brought in as revenue. While that is something you should aim to avoid in your compensation plan, it doesn't solve the problem you're most likely facing.
A tiered commission structure is one of the tools you have to build incentives right into an offer. It works like this: You set a base commission, duration, and type.Then you add tiers with incrementally higher commissions, motivating affiliates to sell more and earn more.
One of the top questions we hear is “What is the average commission rate for sales reps?” In general, most manufactured products prompt a commission rate of anywhere from 7% to 15%. For commissions as a percentage of gross margin, (sales price minus direct expenses) a standard range is anywhere from 20% to 40%.
They are usually rewarded by commission payments for their sales. Sales agents are independent and work with businesses, rather than for them, they are not an employee. Unlike wholesalers or distributors, sales agents do not normally buy or store product stock.
They are generally paid on a commission basis, typically 5 to 15 percent of net sales. However, in some businesses independent representatives are paid on a ledger basis, which means that they can earn a commission on every sale made in their territory, even if a customer contacts the manufacturer directly.
If 6% of your website visitors join your mailing list or make a purchase, your website is 6% effective. But here's the thing: That's actually very good. In fact, a “good” website conversion rate falls between 2% and 5% across all industries.
The average rate regardless of industry is about 3%. The sales statistics below show sales conversion rate by industry. Some categories, like electronics, enjoy rates of over 20%.
While ZipRecruiter is seeing annual salaries as high as $91,000 and as low as $19,500, the majority of Sales Base salaries currently range between $34,000 (25th percentile) to $57,000 (75th percentile) with top earners (90th percentile) making $79,000 annually across the United States.
Effective salespeople take pride in adding value to their organizations. Over the years, I've observed that the most productive sales reps make 80 to 100 phone calls per day. Although many people might consider this a lofty goal, it's possible with the right systems in place.
What is the typical sales commission percentage? The industry average for sales commission typically falls between 20% and 30% of gross margins. At the low end, sales professionals may earn 5% of a sale, while straight commission structures allow a 100% commission.
How do you calculate a 2% commission? A 2% commission is just 2% of the sale price: Alternatively, move the decimal place of the sale price two places to the left.
A 2% real estate commission is a discounted rate offered by some seller's agents to cover the costs of listing, marketing, and closing the sale of a home. The typical seller's agent fee is 3%.
Introduction: My name is Margart Wisoky, I am a gorgeous, shiny, successful, beautiful, adventurous, excited, pleasant person who loves writing and wants to share my knowledge and understanding with you.
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