Blogs

After factoring in the variable sales commissions for payroll management, it's still important to ensure accurate salary information.

5 Ways Sales Commissions Computation Affects Payroll

Do you employ sales staff employees who have sales commissions in their payroll in addition to their basic monthly salary? Are you expecting higher additional sales volumes during special sales seasons such as the Great Singapore Sale, Singles Day 11.11, Christmas season or Chinese New Year season? If you are an employer, please read on to find out how sales commissions of your employees can affect their payroll calculation, in terms of their CPF and self help contributions.

Sales commissions must be calculated accurately for payroll matters. Read more about it.

What is a Commission Payroll

A sales commission is money paid to an employee for completing a task, typically selling a certain amount of goods or services. Sales commissions are sometimes used as incentives by employers to increase worker productivity. A commission can be paid in addition to or in place of a salary.

What Is The Difference Between Commission And Salary

Sales commissions is a variable component of salary. It can be part of an employee’s salary or a separate source of income paid on a different schedule. It is determined as a percentage of total sales. That is, the more products or services an employee can sell, the more money they will receive.

Sales commissions are usually classified as Additional Wage component (AW), whereas the basic monthly salary is known as Ordinary Wage (OW).

Typical Roles That Pay Sales Commissions:

  • Retail
  • Property
  • Hospitality
  • Banking

How Sales Commissions Affect Payroll In 5 Ways:

Do you know that payroll processes take into consideration many factors? Here are the 5 usual ways how sales commissions affect payroll processing:

Method And Timing Of Sales Commissions

How and when the payment of commission is made is stipulated in the employment contract or work policy.

There can be a deadline of commissions as additional wages to take into consideration. Some sales figures may be declared before 24th June for example, while others after that date. If 24th June is the deadline date, then sales figures are being reconsidered as commissions payable by what date. 

Often, payroll processors in the HR department feel burdened by the recalculations due to the frequent modifications they receive.

CPF Is Computable

CPF calculation may be a factor if sales commissions are taken into account. Please ensure they are accurately reflected in the payslips if necessary.

As the commission of sales may or may not be part of the regular remuneration of your employee, the way CPF is being calculated is also affected.

Honesty And Accuracy

When developing a successful commission system, businesses must consider honesty and precision. When salespeople believe they are being fairly compensated, they are more likely to stay with a company rather than seek better opportunities. Effective arrangements have an appropriate mix of income and commission, as well as realistic targets. How a company compensates its employees can have an impact on profitability while also attracting and retaining top talent. Hence, it’s definitely imperative that the sales commissions are accurately reflected in their payslips together with their CPF computation so that the figures meet up with expectations.

Market And Economic Changes May Affect Sales Percentage Calculations

Earnings on commission-based positions typically fluctuate according to seasonality, economic trends, and market changes. Since such income fluctuations are anticipated, especially during high sales seasons in November, the HR executive should work together with the employee to make sure the sales figures are proportionate.

Bonuses To Sales Commissions

Individuals who consistently outperform their targets or during a specific sales season may be eligible for bonus commissions from certain businesses. For example, a medical supply company may offer bonuses to employees who sell 300 units in the first quarter of the year in order to motivate them to work harder. Bonus commissions serve as both an incentive and a way to recognise individuals who make significant contributions to the company’s success. Bonus commissions are unusual and are rarely part of a standard compensation structure; however, some businesses use bonus commissions to attract more diverse employees.

In some situations, bonus commissions do apply. Individuals who consistently outperform their targets or during a specific sales season may be eligible for bonus commissions from certain businesses. For example, a medical supply company may offer bonuses to employees who sell 300 units in the first quarter of the year in order to motivate them to work harder. Bonus commissions serve as both an incentive and a way to recognise individuals who make significant contributions to the company’s success. Bonus commissions are unusual and are rarely part of a standard compensation structure; however, some businesses use bonus commissions to attract more diverse employees.

Calculate Variable Wage Components Easily With Jusixty

Jusixty can enable easy calculation of variable additional wages like sales commissions and bonuses.

It can do it in 60 seconds with some standardised templates to fill in the blanks.