How to Correct Sales Commission Errors

by | May 9, 2023

There are a lot of moving pieces associated with commission management such as complex calculations, working with multiple data sources, tracking sales quotas, and managing variable rates among reps or products. All of these factors can make commission management quite complicated for administrators and can lead to potential errors when calculating and processing commission payments.

When errors do happen, it’s important to handle commission errors in a way that helps mitigate issues in the future, maintain trust with your sales reps, and ensure all of the reporting is handled appropriately. Overall, correcting payroll errors for commission checks will vary depending on the nature and extent of the error. However, below are some general steps you can take to correct the error.

Identify the Commission Error

The first step is always identifying the error. It is helpful to conduct regular audits of your sales and commission reports in order to help recognize any errors before and after the cycle is processed. In some cases, the sales rep or manager will be the one to identify the problem and come to you for resolution. However the error is discovered, it is a good practice to review all of the original sales data, commission rates, and any other relevant information to ensure that there are no other errors present in the commission cycle processed.

Depending on the error, it may be a good idea to look in past reports to make sure that it hasn’t been present in previous commission cycles. If it’s something such as an incorrect commission rate, the mistake can be compounded if gone unnoticed for a long period of time.

Determine the Correct Commission Amount

Once you have identified the error, you will need to recalculate the payments to determine the correct commission for the affected sales rep. When determining the correct commission amount, verify the data, double-check the commission rates, and account for any other calculation variables such as tiered rates, ceilings, or quota attainment.  

Generally, it is easier to fix an underpayment than an overpayment. If a sales rep is underpaid, they will likely be eager to receive the additional income and you can easily add the extra amount on their check in the next payroll cycle or issue the employee a new commission check.

However, if the sales rep is overpaid, the correction will either entail deducting the overpayment on the employee’s next check or asking them to write a check back to the company. This may result in an unhappy employee, so be compassionate to the employee’s situation and be ready to address any concerns that they may have.

Commission administrator and employee sit at desk observing sales reports in order to correct a commission error.

Notify Affected Team Members

After you have the correct commission payment, you will need to notify any affected sales reps. This will also include any managers or supervisors directly above the employee as well.

It can be helpful to have all of the necessary information before contacting the sales rep as they may have questions and concerns. Lay out how the mistake happened, what needs to be done in order to correct it, and how measures will be put in place to prevent it from happening again. Again, be prepared to answer questions or concerns from the sales rep, but it will be reassuring to the employee that you have a plan to avoid these problems in the future.

Correct the Commission Payment

Finally, make any necessary corrections to the commission management software, payroll system, or other relevant records to ensure that the correct commission amounts are paid to employees and reflected accurately in your reports. As you are making updates to your systems, pay attention to effective dates and when the changes will be enacted. You will also want to review all pertinent reports to make sure that the corrected data is updated and showing accurately.

Additionally, be sure to keep detailed records of the correction, such as any communication between the employee and the steps taken to correct the error.

Prevent Similar Errors from Occurring in the Future

In order to prevent mistakes in the future, it is important to review your commission and payroll processes to identify any potential causes of the error. You may need to implement additional checks and balances, provide training to administrative staff, or institute other procedures or measures as necessary to make sure that similar mistakes are avoided.

Automate Commission Management

Managing sales compensation can be time-consuming and tedious and that can cause errors to happen. Core Commissions helps minimize these errors by completely automating all components involved in processing commission payments.

Prevention is by far the best tactic for correcting commission errors and Core’s single-view auditing makes it simple to conduct regular checks on all of the calculations involved in a sales rep’s pay. Additionally, with Core’s Enterprise or Managed Services subscription options, we can help you sort through these mistakes when they occur through use of our employee dispute feature.   

Contact us or schedule a free demo to learn more about how Core can automate commissions for your company.

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