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Overriding commission, often referred to simply as override commission, is a type of compensation arrangement commonly used in sales organizations, particularly in multi-level marketing (MLM) or direct selling companies.
Overriding commission, also known as override commission, is a form of compensation earned by individuals based on the sales performance of the team or downline they manage or recruit within a sales organization.
Essentially, it allows individuals to earn commissions not only on their own sales but also on the sales generated by the members of their team.
In insurance, override commission is commonly paid to senior agents, general agents, or agency managers for policies sold by their downline agents. This encourages the senior personnel to manage, mentor, and grow the agent network.
The override commission in insurance may vary depending on the company’s compensation structure and the type of policy sold.
In the travel industry, override commission refers to the additional commission earned by travel agencies or agents based on the sales performance of their sub-agents or the travel consultants they manage.
Several parties benefit from overriding commission within a sales organization:
Overriding commission is calculated as a percentage of the revenue (e.g., total sales or insurance premium) generated by subordinate agents.
It is typically paid to sales managers, supervisors, or upline agents as an incentive for team performance and mentorship. Formula to calculate overriding commission:
Overriding Commission = Total Sales or Premium × Overriding Commission Rate
Where:
Let’s say:
Calculation:
Overriding Commission = $100,000 × 5% = $5,000
So, the manager or supervisor earns $5,000 as an override commission on that sale.
Overriding commission works by allowing individuals within a sales organization to earn commissions not only on their own sales but also on the sales generated by the team or downline they recruit, manage, or oversee. Here's how it typically works:
The duration for paying override commissions can vary. Typically, they are paid for as long as the policy remains active or as outlined in the commission agreement. In some cases, commissions may be limited to a set number of years or decline over time. It depends on factors such as contract terms, industry standards, and company policy.
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