Commission Definition Types and Differences with Bonuses

Commission: Definition, Types, and Differences with Bonuses

Commissions are another income companies give to marketing for their success in selling goods or services. In addition to getting a salary, some people also sometimes receive a commission for their success in offering or selling a product.

The distribution of commissions for each company is certainly different, depending on the percentage of sales and so on. Then, what is the difference between commissions and bonuses? Check out the full explanation of the meaning of commission and its types below!

Definition of Commission

The commission is one of the income received by company employees as marketing outside of their salaries and allowances. Another meaning of commission is a physical reward received by marketing when they have achieved sales targets and made a profit. Commissions can also be used as a marketing motivation to work harder to achieve sales targets.

Commission Type

Commissions to their employees. So, what are the types of commissions? Here are some of them:

1. Basic Salary and Commissions

Basic salary and commissions are one of the most frequently heard types of commissions. The company will give this commission along with the employee’s salary. This commission is given based on the number of sales successfully achieved by marketing.
If marketing achieves or exceeds its sales target, the commission earned will be even greater. However, if marketing does not reach the sales target, then the marketing will not receive a commission from the company but still, get a basic salary every month.

2. Live Commission

The company directly gives Commission Commissions to employees in the amount of 100% or in full after marketing has succeeded in selling products or services. However, this type of commission must be made clear by the company so as not to cause misunderstandings about the commission and salary earned by marketing.

3. Commission Income

The commission is given a percentage of the total sales made by marketing. The commission percentage is based on the amount of income and the company’s policies.

4. Tiered Commission

Commissions Tiered commissions are commissions that have different percentage levels. That is, if the sales made by marketing are large enough, the commissions obtained by marketing are also large. This type of commission will motivate marketing to achieve sales targets so that marketers can strategise in any way to achieve their sales targets.

5. Lottery Commission

Draw This commission draw is a commission received by marketing but with a guaranteed monthly payment. This commission is earned by marketing in an amount less than the target.

How to Record Commissions

Please note that the company must properly record commissions. For that, here is how to record the correct commission.

Example: Mr Anthony works in a marketing company at CV. Example and managed to sell products for 80 million dollars with a commission of 10% (ten per cent).

So, to calculate the commission, first multiply 80 million by 10% as follows:
Commission = 80,000,000 x 10%
Commission = 8,000,000

Next, Company CV. Example will record the following.
Journal: Sales journal:
Revenue (D ) 80,000
Sales of Goods (K) 80,000

Commission payment journal:
Commission (D) 8,000
Cash (K) 8,000

Marketing entry journal:
Cash (D) 8,000
Commission Revenue (K) 8,000

Difference between Commissions and Bonuses

Some people think that commissions are the same as bonuses. However, the two things are different. The difference between commissions and bonuses is that commissions are given when marketing succeeds in benefiting the company by successfully achieving sales targets. While the bonus is money or incentives, the company provides it to all employees (not only marketing). 

An example of a commission is marketing that successfully sells a company’s product or service. At the same time, examples of bonuses are year-end bonuses and so on.

Not only in sales but commissions can also be obtained in the field of investment, such as commissions earned by brokers. An example of the case in the investment field is when someone sells an asset or investment with the help of a property broker, this broker will provide advice and help the client who sells the support to find a suitable buyer successfully.

Thus, the broker works as a marketing agent who requires a creative strategy in order to sell assets that have been mandated by the client of the owner of the asset. For example, they can make a banner on the asset being sold. They can upload the asset on their website or help market it through their closest people.

If the broker finds a buyer who wants to buy the asset, then the broker is entitled to a commission on the sale from the asset owner. However, if the broker comes from a company, the commission will be given according to company rules.

The percentage of commission earned by the broker depends on the rules that apply to each company. Thus, the greater the assets sold by the broker, the greater the commission earned. If the broker manages to sell the asset at a small price, the commission earned is also small.

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