A fixed rate commission, or a single rate, is a type of commission that is paid to a salesperson based on a fixed percentage of the sale price of each item sold. This percentage does not change, so regardless of the size of the deal or quantity of deals, the rep earns the same amount.
For example, if a salesperson sells a product for $100 and they have a fixed rate commission of 10%, they will earn $10 in commission.
Here are some examples of fixed rate commissions:
- A real estate agent who earns a 6% commission on the sale of a home.
- A car salesperson who earns a 10% commission on the sale of a car.
- A retail salesperson who earns a 5% commission on the sale of clothing.
Fixed rate commissions are a common type of commission structure in sales. They are simple to understand and easy to calculate. We recommend this type of plan as your “first” compensation plan either as a business or if you’re entering a new market, territory, or launching a product or service.
However, they can also be limiting.
For example, if a salesperson sells a high-priced item, they will earn a larger commission than if they sell a low-priced item. This can lead to disparities in earnings between salespeople.
There are other types of commission structures that can be more equitable, such as tiered commissions and performance-based commissions. But fixed rate commissions are still a popular option for many businesses due to its simplicity.
Use this single rate commission plan template to help design your next fixed rate comp plan.