A commission is a percentage of the value of a transaction that is charged to the customer and / or paid to the seller.

A commission is a part of the total value of a transaction. They are usually used in vendor salary structures. From the client’s point of view, it is a collection, an amount that must be paid when making a certain transaction.

The commission as an incentive

The commission is usually used as a mechanism to encourage employee effort. For example, in the commercial area, sellers usually have a salary composed of two parts: a fixed and a variable that is based on commissions on what they are able to sell. In this way, it is sought that the seller strives to specify new sales operations so that his commission grows.

The commissions may vary in their structure and base. Here are some of the types of commissions most used to remunerate sellers:

  • Linear : a commission of X% is paid when the seller achieves the sales goal of Y euros. For example, a fixed amount of 20,000 euros per year is offered but 5% (of these 20,000 euros) will be added if more than 400,000 euros are sold per year.
  • By margin : in this case the commission is applied on the margin that the seller obtains. That is, the commission percentage is applied on the ratio of effective sale price / minimum sale price. So for example, suppose the minimum price is 200 euros and the commission is 2%. If the seller sells it at the minimum price you will get 2% on the sale price. But if you manage to sell at 250, then you will get a 2.5% commission. The higher the sale price, the higher commission.
  • Scale : commissions are set according to the range of values ​​where the sales of the seller are located. For example, 5% is paid if the sales reached were between 0 and 15,000 euros; 10% if sales fell between 15,001 and 30,000 euros; 20% if the sales were worth between 30,001 and 50,000 euros, etc.

The commission as collection

It is the payment made to the customer for a certain transaction. Its value should be related to the costs of carrying out the transaction but it is not always the case. The commissions are usually determined by the degree of competition in the market and by the amount of information that the customer has.

Examples of fee collection

We find the collection of commissions in multiple activities. Thus, for example, when we sell a house, the property broker usually asks us for 5% of the total value of the sale for the service he has provided to us (looking for the buyer and being the intermediary in the transaction).

Another example is lawyers who offer their services in exchange for a commission. Thus, if the case is successful (for example, a claim for compensation), the lawyer will take X% of the proceeds.

We cannot fail to mention bank commissions, that is, the charges that private banks make when they carry out transactions such as deposits, transfers, currency exchange, etc. Your payment method can be through a single payment that involves several types of services (linear) or an individual commission for each type of transaction.

by Abdullah Sam
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