This is a question that pops right away
A commission is simply defined as a payment that a business or company gives to employees or salesperson in exchanged for their services for completing sales or facilitating them. Similar to calculations to salaries and pay bonuses, the commission calculation process depends on the proprietary structure in your business. Therefore calculation is made based on the structure of the underlying commission agreement where as the owner or employer you can choose what commission scale to use and what structure to include for determining bonus pay and more. A commission calculation process can be performed on bi-weekly, monthly, quarterly, bi-yearly, yearly targets.
There are other factors that apply during the commission calculation processes: Commission basis, Commission rate, Payment delay, Overrides, and Splits, all which can be incorporated depending on what your commission plan is based on. Although commissions can be paid on a bi-weekly, monthly, quarterly, bi-yearly, or yearly basis, the widely used method of commission payment is quarterly and it is the most recommended for every business.
Here’s our recommendation for a suitable commission calculation process
Performing a commission calculation process and calculation on a quarterly target has proven to be the best way to manage and allocate commissions correctly without making the process complex. With the quarterly target, the piece of work, bonuses, and commissions are worked out over a 12-week period to work out a person’s weekly pay. Through working out the average hourly rate to reach the weekly pay, you can add up add up the total pay for the 12 weeks. And through the quarterly method, you can ensure a simple commission plan that will not only allow you to have a good track of your finances but also will allow you to have the most convenient commission calculation process and management .
Away from ensuring proper operation for your business, a quarterly target enables an employer to come up with a scale that will focus on measuring salespersons’ achievements in quarter’s numbers. This helps to balance a company’s workforce results on an annual basis.
Although the quarterly target is the best way of doing a commission calculation process, it is regarded as one of the trickiest methods because it involves several details that must be considered to ensure it works right. For this reason and more, Blitz is available to offer the necessary services to help you calculate commissions on quarterly targets.
- Book: The Sales Compensation Handbook by Stockton B. Colt. 2nf Edition, 1998, USA
- LinkedIn, Pulse – Alex Joy – How to calculate Performance Incentive – With Example