The commission (also brokerage fee, markup, or agio; in English: commission) is a classic and possibly one of the oldest forms of variable compensation. It is a payment for sales and brokerage activities.
Usually expressed as a percentage of a defined value, the commission is paid out at regular intervals and depends on successfully completed transactions. Thus, the commission falls under success-based compensation models and becomes payable only upon successful completion of a deal. Common sectors for commissions include real estate, finance and banking, personnel placement, and insurance.
Example: A salesperson receives a 5% commission on the sales price of a product. If the product is sold for €1,000, the salesperson earns €50 in commission.
There are various types of commissions. Differences arise from the industry, type of work, and associated effort:
Commission is legally regulated in the German Commercial Code (HGB) and the Civil Code (BGB). Referred to as a success bonus in the HGB, the following aspects are addressed:
Scope of Commission
Commission rules apply not only to self-employed commercial agents but also to salaried employees engaged in commercial activities.
Entitlement to Commission
A commission claim arises if the person entitled to commission has initiated, mediated, or concluded a transaction, and the closing of the deal is primarily attributable to their efforts.
Payment Timing
If not otherwise agreed, the commission must be settled by the end of the following month. The accounting period may be extended up to three months.
Commission Amount
Usually specified as a percentage based on the contract value. While the amount is not legally fixed, it should reflect industry standards.
Despite legal regulations, commission agreements should clearly define entitlement, amount, calculation, and payment in writing to ensure transparency and avoid misunderstandings.
Commissions are always taxable. Commissions from self-employment are subject to VAT, while those earned by employees are subject to income tax. Additionally, commissions are subject to social security contributions, including health, pension, unemployment, and long-term care insurance.
Commissions differ from other variable compensation types. While commission is classified as success-based compensation, bonus payments or premiums are forms of performance-based compensation. The difference lies in the nature of the achievement that triggers the payment.
The method of calculation also varies. Commission depends on revenue or profit, while bonus size typically depends on individual performance.
As a variable compensation component, commission—like base salary—counts toward direct personnel costs. Calculating it alongside multiple salary elements can be complex. To fully leverage the benefits of variable compensation, a transparent, reliable, and comprehensible calculation is essential.
maXzie makes this process simple, precise, and transparent. Our software automates commission calculations based on individual goals or team goals. All calculations occur in real-time, with clearly presented results. This ensures fair compensation that builds trust and motivates your sales teams to excel.
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