What Is Retail Commission for a Sales Associate?

by Dennis Hartman; Updated September 26, 2017

The retail industry consists of managers and business leaders as well as sales associates who interact with customers, explain product offerings and process sale transactions. Sales associates receive compensation in a number of different ways, including hourly wages, annual salaries and commission pay. While retail commission is beneficial for some sales associates and businesses, it offers drawbacks to others.

Definition

Retail commission refers to a system of compensation based on a sales associate's performance in terms of the number and value of sales in a given time. The most basic form of retail commission is straight commission, which pays a sales assistant a flat percentage of each sale the associate processes for a customer. Other forms of retail commission involve more complex calculations. Sales associates may earn a commission as a bonus on top of guaranteed pay, or a commission may serve as a sole means of earning income.

Rates

Retail commission rates vary widely among different types of retailers and from one employer to another. In general, retail commissions are percentages in the single digits. Variations occur because different types of retailers have different profit margins from which to offer commission pay. The cost of goods also influences how much commission sales associates can earn. For example, the profit structure and sales value of an automobile is very different from that of a cell phone.

Pros and Cons

Retail commission can have benefits and drawbacks for both workers who receive it and employers who pay it. Retail commission motivates employees and forces them to compete with one another for new customers. This is positive for a workforce as long as sales associates continue to work as a team and represent products accurately to customers. Employers can save on payroll by offering retail commission to employees, only paying out of the profits they make and eliminating the chance that ineffective sales associates will cost more to employ than they earn for the business. For employees, retail commission is inconsistent based on customer buying trends and the quality of product offerings, both of which are out of an individual sales associate's control.

Regulations and Limits

Each employer that chooses to offer retail commission to its sales associates is free to set its own rules and limitations. For example, some companies pay new employees a flat rate when they begin before transitioning them to commission-based pay. Others pay commissions on a per-sale basis, or require sales associates to pool their commissions and share them with one another regardless of individual performance. This makes it especially important for retail sales associates to ask questions about commission pay systems before accepting new jobs or when compensation policies in a workplace change.