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Glossary Terms
Compass - The Only Sales Glossary You Need
Draw against commission is a common payment structure utilized in sales and commission-based roles to provide employees with a guaranteed base salary while still incentivizing them to achieve high levels of performance and sales success.
In this compensation model, employees receive a predetermined base salary, often referred to as a draw, which serves as a minimum income guarantee regardless of their sales performance.
A draw against commission is a payment arrangement commonly used in sales or commission-based roles. In this arrangement, an employee receives a guaranteed base salary or draw amount, which is paid regularly (e.g., monthly or bi-weekly).
This base salary serves as a minimum income guarantee, providing financial stability to the employee regardless of their sales performance.
A non-recoverable draw against commission is a variation of this payment structure where the draw amount is not required to be repaid by the employee, even if their commission earnings do not exceed the draw amount.
In other words, the draw is treated as an advance on future commissions and is not recoverable by the employer.
There are several types of draw against commissions that companies use to support sales teams:
Draw against commission offers key advantages for both employers and sales professionals:
Despite its perks, draw against commission may pose challenges:
Yes, a draw against commission can be beneficial for both salespeople and employers. It offers financial support during uncertain sales cycles or for new hires ramping up. For employees, it reduces income gaps.
For employers, it attracts and retains talent. However, its effectiveness depends on whether it’s a recoverable draw or not, and how clearly expectations are set.
Not all sales jobs utilize a draw against commission payment structure. It is more common in industries or roles where sales performance may fluctuate or have seasonal variations, such as retail, real estate, or certain types of business-to-business sales.
However, the use of draw against commission may vary depending on company policies, industry norms, and individual employment agreements.
This model is used to provide financial stability to sales representatives, ensuring they have a steady income even when commissions haven’t yet accrued. For employers, it supports sales team motivation and retention, particularly in industries with long sales cycles or unpredictable deal closures.
Draw against commissions can also help new hires ramp up without immediate financial pressure.
In a draw against commission setup, a salesperson receives a regular advance (weekly or monthly), acting as a safety net when commissions are low. As sales are made and commissions are earned, those earnings offset the draw.
If commissions exceed the draw, the excess is paid as bonus income. In the case of a recoverable draw, any shortfall is carried forward and repaid through future commissions, keeping the compensation fair for both parties.
