---
title: "Collection: Nine Models of Sales Commission, Each a Winning Strategy!"
description: "All commission methods are here. Currently, the industry commonly uses nine methods for calculating sales personnel compensation: 1. Pure Commission System, 2. Pure Salary System, 3. Basic System, 4. Sharing System, 5. Floating Quota System, 6. Year-on-Year Comparison System, 7. Lagging Punishment System, 8. Negotiation System, and 9. Ranking Remuneration Method. We will introduce these nine calculation methods in detail from aspects such as definition, calculation formula, applicable conditions, and advantages and disadvantages."
author: "New Distribution"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-12-30"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/collection-nine-models-of-sales-commission-each-a-winning-strategy-6278b1a7/"
markdown: "https://xinjignxiao.com/en/articles/collection-nine-models-of-sales-commission-each-a-winning-strategy-6278b1a7.md"
original_source: "https://mp.weixin.qq.com/s/Zqvb_-Ck2uVQyEkoyxVTiw"
translation: "https://xinjignxiao.com/zh/articles/%E6%94%B6%E8%97%8F-%E9%94%80%E5%94%AE%E4%B8%9A%E7%BB%A9%E6%8F%90%E6%88%90%E7%9A%84%E4%B9%9D%E7%A7%8D%E6%A8%A1%E5%BC%8F-%E6%8B%9B%E6%8B%9B%E5%88%B6%E8%83%9C-6278b1a7.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/collection-nine-models-of-sales-commission-each-a-winning-strategy-6278b1a7/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# Collection: Nine Models of Sales Commission, Each a Winning Strategy!

> All commission methods are here. Currently, the industry commonly uses nine methods for calculating sales personnel compensation: 1. Pure Commission System, 2. Pure Salary System, 3. Basic System, 4. Sharing System, 5. Floating Quota System, 6. Year-on-Year Comparison System, 7. Lagging Punishment System, 8. Negotiation System, and 9. Ranking Remuneration Method. We will introduce these nine calculation methods in detail from aspects such as definition, calculation formula, applicable conditions, and advantages and disadvantages.

**All commission methods are here.**
> Currently, the industry commonly uses nine methods for calculating sales personnel compensation, which are:
>
> 1. Pure Commission System,
>
> 2. Pure Salary System,
>
> 3. Basic System,
>
> 4. Sharing System,
>
> 5. Floating Quota System,
>
> 6. Year-on-Year Comparison System,
>
> 7. Lagging Punishment System,
>
> 8. Negotiation System,
>
> 9. Ranking Remuneration Method.
>
We will introduce these nine calculation methods in detail from aspects such as definition, calculation formula, applicable conditions, and advantages and disadvantages.

**1. Pure Commission System**
The Pure Commission System refers to a method where sales personnel receive a certain percentage of sales (gross profit, profit) as sales compensation. In this system, sales personnel have no fixed salary, and their income is entirely variable. In the United States, 20% of enterprises adopt the pure commission sales compensation system, and domestic enterprises also use it widely. The calculation formula is as follows:
Personal Income = Sales (or Gross Profit, Profit) × Commission Rate
Implementing the pure commission system requires a series of conditions, including: there are already individuals who have achieved well-known high incomes; once income is obtained, it has a certain stability and continuity; the time from starting work to the first commission should not be too long; the products suitable for the pure commission system should be those with not particularly high unit prices but very considerable gross profit margins.
The biggest advantage of the pure commission system is that the sales compensation direction is very clear, which can motivate sales personnel to work hard. It also completely transfers the risk of sales personnel wage costs to the sales personnel themselves, greatly reducing the pressure of company operating costs.
Of course, its drawbacks are also obvious: the purely commission-oriented behavior leads sales personnel to be keen on profitable transactions while neglecting other matters that do not directly generate benefits, sometimes even damaging the company's image; the huge risks and pressures brought by the pure commission system weaken the stability and cohesion of the sales team; it is easy to foster arrogance among sales personnel, leading to disobedience to management and disrespect for leaders.

**2. Pure Salary System**
The Pure Salary System refers to a fixed salary system for sales personnel, regardless of whether the current sales target is achieved. In the United States, 28% of enterprises use the pure salary system.
The formula can be expressed as: Personal Income = Fixed Salary
When salespeople have a strong demand for things other than money (such as honor, status, skill development, etc.), simply using commission incentives may not be effective. In such cases, the pure salary system is suitable; especially in sales teams with many intellectuals, or in enterprises implementing lifetime employment systems, adopting the pure salary system has become a necessary means.
The advantages of the pure salary system are that it is easy to manage and transfer, and it maintains high morale and loyalty among employees.
However, due to the lack of monetary incentives for sales personnel, it is easy to form a "big pot rice" work style; the implementation of a fixed salary system makes it difficult to evaluate the performance of sales personnel; it is not conducive to the company's control of sales expenses; the salary promotion system is complex and causes many contradictions; it cannot attract and retain more enterprising sales personnel.

**3. Basic System**
The Basic System refers to dividing the income of sales personnel into two parts: fixed salary and sales commission. Sales personnel have a certain sales quota. Regardless of whether the sales target is achieved in the current month, they can receive basic wages (base salary); if the salesperson's current sales exceed the set target, the excess portion is commissioned proportionally. The Basic System actually combines the characteristics of the fixed salary system and the pure commission system, so that the income of sales personnel is not only guaranteed by fixed salary but also linked to sales results; it provides both commission incentives and a relatively fixed income base for employees, so they do not have no idea about future income. Because the Basic System has the characteristics of both the pure salary system and the pure commission system, it has become the most common sales compensation system, adopted by about 50% of enterprises in the United States. The formula is as follows:
Personal Income = Basic Salary + (Current Sales - Sales Quota) × Commission Rate
Or
Personal Income = Basic Salary + (Current Sales - Sales Quota) × Gross Profit Margin × Commission Rate
In actual work, some companies nominally implement a salary plus commission income system, but stipulate that if the sales target is not completed in the current month, a certain proportion is deducted from the basic salary. For example, a company stipulates that each person's monthly sales target is 100,000 yuan, with a basic salary of 1,000 yuan. If the monthly sales are less than the target, a 1% deduction is applied. This is actually a disguised form of the full commission system, because its nature is the same except that the proportions before and after the target may not be consistent.

**4. Sharing System**
The Sharing System refers to determining the total income of all sales personnel in advance, and then after the end of the month, determining compensation according to the proportion of individual sales to total sales, thereby sharing the total income. The formula is as follows:
Personal Monthly Salary = Group Total Salary × (Personal Monthly Sales ÷ Total Monthly Sales)
Or
Personal Monthly Salary = Group Total Salary × (Personal Monthly Gross Profit Completion ÷ Total Monthly Gross Profit Completion)
Group Total Salary = Single Person's Rated Salary × Number of People Sharing (at least more than five people), otherwise it is easy to collude and embezzle, thus failing to achieve the purpose of encouraging internal competition and improving work efficiency.
The advantages of the Sharing System are: simple operation, easy to learn and understand; costs are relatively fixed, but it can still encourage competition.
Its main drawbacks: employees find it difficult to understand; the relatively fierce internal competition caused by the Sharing System is not conducive to coordination between departments.

**5. Floating Quota System**
The Floating Quota System refers to multiplying the monthly sales quota (the average sales per person obtained by dividing the total monthly sales by the number of sales personnel) by a certain proportion. If an employee's actual sales are below the quota, they only receive basic salary; if the sales exceed the floating quota, the excess portion is commissioned proportionally, plus basic salary. The formula is as follows:
Personal Salary = Basic Salary + (Personal Current Sales - Current Floating Quota) × Commission Rate
Current Floating Quota = Current Average Sales per Person × Proportion
Among them, the set proportion is generally 70%-90%, which is more appropriate.
When adopting the Floating Quota System, the following two conditions must be ensured: 1. Each salesperson's sales opportunities are relatively balanced; 2. The number of sales personnel participating in the Floating Quota System should be as large as possible.
The Floating Quota System can comprehensively reflect market conditions and reduce the impact of drastic environmental changes on sales personnel's income; it is relatively simple to operate and can reduce errors; it can fully encourage internal competition, greatly improve work efficiency, and help control costs. However, the fierce internal competition caused by the Floating Quota System is detrimental to internal unity and cooperation.

**6. Year-on-Year Comparison System**
The Year-on-Year Comparison System refers to comparing each person's sales with the same period last year. If sales are worse than last year, punishment is imposed, with the degree of punishment linked to the decline ratio. The formula is as follows:
Personal Salary = [Basic Salary + (Current Sales - Quota) × Commission Rate] × (Current Sales ÷ Sales in the Same Period Last Year)^n
n can be 1, 2, or 3, depending on needs.
The main purpose of implementing the Year-on-Year Comparison System is to prevent sales personnel from developing a "slick" work attitude due to long working hours and seniority; or being restless in their own work, engaging in side businesses, leading to a decline in sales. It is not suitable for sales declines caused by overall market deterioration. Its biggest advantage is that it takes effect quickly, but its disadvantages are also obvious: it is prone to causing conflicts, and due to the difficulty of conversion between periods, the Year-on-Year Comparison System can often only last for a few months.

**7. Lagging Punishment System**
It stipulates that those ranked last, second to last, third to last, etc., in sales will be fined.
The Lagging Punishment System is a method to address the situation where many salespeople in the company are lax and not working hard. Its advantage is that the scope of punishment is small, but the impact is large, serving as a warning to others. However, it is easy to cause negative psychology among backward personnel, who may even confront management or leave the company. Therefore, this method is mainly used in state-owned enterprises.

**8. Ranking Remuneration Method**
The so-called Ranking Remuneration Method means fixing the remuneration or wages of all sales personnel, calculating the sales of each salesperson in the current month, and finally distributing wages according to the order of first place, second place, third place, etc.
When implementing the Ranking Remuneration Method, attention should be paid to making a large gap between the wages of the last place and the second-to-last place to prevent the "big pot rice" situation. The enthusiasm mobilized by this method is positively correlated with the income gap.
Calculation formula:
Personal Salary = Highest Personal Salary - (High-Low Salary Gap ÷ Current Number of People) × (Ranking - 1)
When the market situation changes dramatically and it is impossible to determine sales quotas and commission rates, the Ranking Remuneration Method can be considered.
The Ranking System eliminates the impact of market changes on sales, ensures employees' income, and encourages moderate competition; it is beneficial for the stability of the sales team and improving salespeople's loyalty. However, when the original sales are already very high, it will be difficult to encourage new breakthroughs.

**9. Negotiation System**
The so-called Negotiation System is based on the Basic System (basic salary + commission), adjusting the gap between the sales revenue used for commission and the commission quota. Sales personnel receive compensation according to the adjusted standard. The formula is expressed as:
Sales Personnel Salary = [Basic Salary + (Sales Revenue - Quota) × Commission Rate] × (Price Coefficient)^n
The price coefficient is determined by the ratio between the actual selling price and the planned price, that is:
Price Coefficient <= (Actual Sales / Planned Price Sales)^n
Therefore, the Negotiation System's sales compensation system can be comprehensively expressed as:
Sales Personnel Salary = [Basic Salary + (Sales Revenue - Quota) × Commission Rate] × (Actual Sales ÷ Planned Price Sales)^n
Among them, the quota and commission rate can be determined and adjusted by the enterprise according to the industry and its own situation. According to the specific situation of the selling price, the enterprise can adjust the power of the price coefficient. For example, if a loose policy is adopted, n can be set to 1; if a stricter policy is needed, n can be set to 2, or even 3, 4, etc., to strictly control the transaction price.
Adopting the Negotiation System's compensation system can overcome the disadvantage of excessive product price elasticity that is difficult for enterprises to control, and to a certain extent prevent sales personnel from deliberately lowering prices to close deals. Because the commission standard is closely related to the coefficient between the actual price and the planned price, if sales personnel deliberately close deals at low prices, this coefficient will inevitably decrease. In this way, even if salespeople complete a lot of sales, it is difficult to get commissions or the commissions are very small. Sales personnel will inevitably weigh the pros and cons, keeping the enterprise's prices at a reasonable level.

Source: Yimai Consulting
-END-


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671