How Can Companies Grow Sales by Hiring Commission Only Sales Employees? Posted on Feb 22, 2019
Many companies find it to be advantageous to pay outside sales employees purely on commission. In order to ensure outside sales employees are financially stable, companies often use a recoverable draw against commission system.
Outside sales employees, who spend more than half their time away from the office engaged in selling activities may be paid on a draw against commission basis because the minimum wage law does not apply to outside salespersons. This is not true for inside sales employees in California and elsewhere.
In a recoverable draw against commission system, at the start of each pay period, an outside sales employee is advanced a specific amount of money, which is referred to as a "recoverable draw." The recoverable draw is then deducted from the sales employee’s commission at the end of each pay period. After paying back the recoverable draw, the employee keeps the rest of the commission money.
A recoverable draw against commission is essentially an advance that is subtracted from the employee’s commissions. If there are any remaining commissions after a specified time, the employer gives the employee the remainder. The recoverable draws are not a salary, but rather regular payouts instead of periodic ones. A recoverable draw is a payout that the employer expects to gain back. Employers are basically loaning employees money that they expect them to be paid back by earning sales commissions. If an employee doesn’t earn enough commissions to cover their recoverable draw amount owed, the debt rolls over to the next commission payout period.
A recoverable draw against commission system can be a win-win for employers who get paid back the amounts loaned to the commission-only employee and for sales employees who greatly benefit from the financial stability of a recoverable draw against commission system.