How does draw against commission work?
by Stuart Musson
Getting paid in whole or in part on a commission
basis means that your performance and success on the job will have a direct
impact on your paycheck. Being paid using a commission structure gives you, the
Recruitment Professional, control over how much you earn during a specific
period. In many cases it offers you unlimited earning potential based on how
good you are at what you do and how successful you are.
Many recruitment jobs base at least part of their
pay structure on Recruitment Professionals, such as you, making commission.
Some Recruitment Professionals work on straight commission, and there are
others, particularly in the larger Recruitment companies, who simply work for
an agreed upon base salary + commission plan. An intermediary step between the
two is a pay system called draw against commission, which is quite common for
the small to medium size companies that Precision Recruiting typically
represents.
Draw against commission generally works in the
following way. At the beginning of each pay period you’re given a
specific amount of money in advance, called a “pre-determined draw”. This draw
is deducted from your commissions at the end of a pay period. When you exceed your sales goal, you’re
paid a commission, but your draw in the past has been “drawn” or subtracted from
this commission.
Once you meet or exceed the sales goals, you are
paid in straight commission, which is normally more than your draw.
For
example: The Recruitment Professional accepts draw of $4000
per month. There is a 3 month period before earning a commission of $24000
(Approx 3 Perm placements). The commission paid would be $24000 - (3 x 4000) =
$12000, so your benefit would equal the entire $24000 for 3 months.
However, if you fail to meet the sales goals in the
future, you are merely paid your pre-determined draw amount again and the draw
against commission starts over.
What’s really occurring here is that you are
working on a straight commission, but you are guaranteed the same draw from pay
period to pay period to pay the bills. In order to make more money in this
system, you have to consistently sell above the draw level to make sure future
paychecks won’t have commissions deducted from them.
This payment is slightly different than one where Recruitment
Professionals are given a base salary + commission. Though base salary +
commission Recruitment Professionals may still have sales goals to meet; not
meeting the sales goals does not affect their pay. As they receive their salary
plus a percentage on anything they do sell.
With a draw against commission your company understands there is a risk
inherited by you and therefore will pay higher commissionable earning
percentages versus a base salary + commission. Which allows for the main
advantage of draw against commission; it rewards the superior Recruitment
Professional for being able to exceed sales goals. Usually the best way to earn
higher compensation is to exceed your sales goals so that you’ll get paid more
than your draw rate every pay period. Again if you are very good at what you do
you will earn more money!
In positions where you generate your own leads, draw
against commission is an effective payment method as it will motivate you to
work smarter and harder to obtain a higher paycheck. There are still issues
outside the your control like a negative economy that might have you making
only draw but keep in mind those in a base salary + commission pay structure
may be laid off first, in a negative economy, as the company takes all the risk
with a base salary payment structure not you.
With a draw against commission versus a straight commission at least in lean
times, there is that draw amount to fall back upon, which can be better than
making straight commission if sales suddenly take a downturn, where no sales
means no income.
Live, Laugh and Learn
Precision
Recruiting
Web: www.PrecisionRecruiting.ca
