Average Sales Commission [2023]

Average sales commission research summary: Sales can be gratifying if you know what you’re doing. After all, commissions can add a substantial amount of additional income to your paycheck.

So, if you’re a job seeker wanting to know what you can make off commissions or a sales rep looking to see how you’ve been performing, we’ve got you covered. We’ve investigated average sales commissions in the US, and according to our research:

Key Takeaways:

• The average sales commission in the US is between 20-30% of gross margins.

• Architecture sales have the highest average sales commission of 37%.

• Pharmaceutical sales have the highest average additional pay of $41,475.

• Entry-level sales workers may receive commissions as low as 5%, while those more experienced may receive up to 100% commission without any supplemental base pay.

Average sales commission rates by industry

Average sales commission rates often vary by industry, with some having larger commission margins than others. In part, this is because the amount of commission a real estate agent receives from selling a home will be totally different than someone in retail.

Here is a chart of average sales commission by industry:

Average sales commission by industry

Of the sales commission industries listed, the Architecture industry has the highest average sales commission of 37%. On the opposite end, the Real Estate industry only has an average sales commission of 28%.

However, these percentages can ultimately be deceiving, as the annual sales commissions from Real Estate are actually higher on average than those from Architecture. In this regard, the highest paying sales commissions on average come from the Pharmaceuticals industry ($41,475), while the lowest comes from Travel Agents ($21,233).

What Affects the Average Sales Commission?

Though the average sales commission is between 20-30% for most sales representatives, there are many factors that contribute to your commission. For example, some companies may have sales commissions as low as 5%, or, you could make your entire salary off commissions.

Here are some important variables:

• Volume of sales. Exceeding set sales targets allows many sales representatives to earn increased commission rates for the extra sales they generate.

• Sale difficulty and length. Some industries or products are more challenging to sell, or require the salesperson to take time building stronger customer relationships for successful conversion. These individuals are often compensated with higher wages and lower commission rates, as they may receive fewer sales over time.

• Experience. Newcomers typically receive a smaller commission percentage but a higher fixed salary compared to seasoned sales professionals who consistently achieve their sales targets.

Ultimately, if you’re not sure which sales commission rate would rate would be appropriate for you, be aware of your skill level and research your industry. Then, once you feel informed, ask your current or potential employer about their typical sales commissions.

Average sales commission FAQ

1. What are sales commission rates?

   Sales commission rates are the share of a sales value that gets paid out to the person who made the sale. Here is an example of how a sales commission rate might work:

   • A real estate agent sells a house for a home and will receive a 6% sales commission based on the value of the sale. If the home was sold for $500,000, that means the real estate agent will receive a $30,000 commission.

     Sale Value ($500,000) x Sales Commission Rate (6% or 0.06) = Commission ($30,000)

2. How much do sales representatives make?

   The average sales representative salary is $56,500 per year, but this can also vary a lot. First and foremost, different industries will offer different base salaries and different sales commission rates.

   For instance, the Auto industry has a high average base pay of $80,980, while the Travel industry has a much lower average base pay of $39,029.

   As far as commissions, those from the Auto industry and the Pharmaceutical industry might have a similar base pay, but those in the latter industry make $6,000 more off sales commissions on average.

   Further, average sales representative salaries are usually measured by estimating the On-target earnings (OTE), or the average made when consistently achieving sales goals. However, this measurement isn’t always accurate person to person, as many people either fail to meet their sales goals, or might be able to surpass sales goals.

3. What are common sales commission structures?

   There are many common sales commission structures you might encounter when working in sales. Here are our top 10 picks for common sales commission structures you should look out for:

   • Commission draw. You receive guaranteed pay in advance, which can be increased once you earn at least that amount through your commissions.

   • Base salary + commission. You’ll earn hourly or salary pay along with a fixed commission rate for sales.

   • Residual commission. You’ll earn your commission through existing accounts that generate revenue.

   • Tiered commission. Your commission rates will increase once a certain quota is achieved.

   • Multiplier commission. You’ll receive additional commission rates with a specific modifier once the initial quotas have been achieved.

   • Gross margin commission. Your commissions are calculated as a percentage of the sale’s total profit.

   • Revenue commission. Your commission will be based on the product’s cost.

   • 100% commission. Your entire income relies on the success of your sales, without a base rate as a safety net.

   • Territory volume. Commission is divided among your team within a shared region, based on sales volume and revenue in the territory.

4. Is 15% sales commission good?

   Yes and no, a 15% commission falls below the average 20-30%, but this largely depends on your industry and base salary. For example, real estate agents and auto salespeople often have lower sales commission rates when compared to other industries, but the products they sell are also far more expensive and require more commitment to sell.

   Additionally, high sales commission rates are less necessary in positions where your base salary is already high, as you won’t need to rely on your sales to make a living.

5. How do you determine a fair sales commission rate?

   Determining a fair sales commission rate requires you to do your homework, and be willing to discuss the topic with your employer/employee. Here are some factors you should keep in mind when researching what a fair commission rate would be:

   • Consider the compensation offered by competitors

   • Know the typical duration of a finalized sale.

   • Understand the level of relationship-building and direct effort needed to make a sale.

   • Estimate how payment should be adjusted according to the product or service’s price.

   • Don’t forget the influence of geographical factors on compensation.

   Using these tips, you can enter a discussion as informed as possible. Knowing your worth, or what you’re willing to pay, is always an essential part of employment.

Conclusion

The average sales commission rate is between 20-30% of gross margins, meaning that the average sales representative makes between 20-30% of their salary off commissions.

Of course, these numbers also vary by industry, with those in the Architecture (37%) and Retail (36%) industries making more of their salaries off commissions, while those in the Auto (30%) and Real estate (28%) industries make less.

Overall, though, the final salary of someone in sales will vary a lot based on their industry, employer, and skill level. When researching what commission is right for you, be sure to evaluate a multitude of factors beforehand.

References

1. Harvard Business School – A Practical Approach to Sales Compensation: What Do We Know Now? What Should We Know in the Future?

Author

Jack Flynn

Jack Flynn is a writer for Zippia. In his professional career he’s written over 100 research papers, articles and blog posts. Some of his most popular published works include his writing about economic terms and research into job classifications. Jack received his BS from Hampshire College.