How Do Sales Commission Rates Differ By Industry?

by | Apr 28, 2023

There are a number of industries that use incentive pay to motivate and encourage sales and revenue generation among their employees. Every industry is different, and every industry has their own standards for structuring sales commissions and determining commission rates.

There are many variables that contribute to how a company chooses to structure sales compensation. Some of these factors include the type of product or service being sold, the region where the company is located, and if the product or service is a one-time purchase or built off of a subscription model with recurring payments from the customer. 

Another way companies may differ in how they structure their commissions is whether or not they decide to pay their sales reps a base salary. In more high-volume sales industries, it can be common for companies to focus their pay on a commission-only pay structure, with the only income for the rep being commissions and other forms of incentive pay. In these industries, sales reps may earn a higher commission rate. 

While there are certain elements of compensation structures to expect for each industry, ultimately, each company will have their own policies surrounding compensation and incentive pay. Below are some of the top industries that pay commission, what the average salary is, and what the average sales commission rates look like.

Insurance

There are three main sects of insurance that pay commissions. These include health insurance, life insurance, and property and casualty insurance. Regardless of the type of insurance being sold, every time an agent sells an insurance policy, the insurance company providing coverage pays the agency a commission. The agent who made the sale takes a cut of that commission. If other agents are involved in the sales, the commission may be split between the two agents.

On average, insurance agents earn an average base salary of $51,936. On top of their base salary, agents can earn anywhere between 5-40% commissions depending on the policy being sold. In the insurance industry, most policies will continue to earn agents commissions for each year that the policy is active. These are called residual commissions and are usually a lot lower than the commission paid on the first-year premium. 

Freight & Logistics

Commission distribution in freight and logistics depend greatly on the role in the sales process. For the sake of simplicity, we’ll be looking specifically at freight agents, who are responsible for brokering the sales of shipments. 

Freight agents are usually not paid a base salary and are instead paid on a commission-only compensation structure based on each load that they sell and place. On average, agents take home around 50-70% of the profit on every freight load they successfully broker. The brokerage they represent in each deal splits commission with them and takes home the remainder of that profit.

Recruiting & Staffing

Recruiters earn commissions based on a percentage of the first-year salary of the candidate they place. Commission payments may differ depending on whether the recruiter works for a recruitment agency or within the company they are hiring for.

The average base salary for a recruiter or staffer is $56,000. Additionally, they earn commissions anywhere between 20-40% of the annual salary for each candidate that they place.

Real Estate

In the real estate industry, a real estate agent’s pay will vary depending on whether they work independently or through an agency. Other variables in their commissions can be location and the type of property being sold.

Real estate agents earn an average salary of $76,421 with commissions ranging from 3-5%. Commissions for each property will vary, but the rates are negotiated between the seller and the agent and outlined in the listing agreement.

If the agent is employed by an agency, they split the total commission of the property with the listing broker. This is usually a 60/40% split, with the agent taking home 60% of the commission earned.

Automotive

The compensation structure for car sales reps includes a base salary ranging from $38,802 to $54,827 and additional earnings from commissions and other incentive-based pay, which average about $29,156.

Frontend sales, which include the price of the vehicle they sell, earns sales reps a 20-40% commission. Whereas, backend commissions – the sale of warranties or other add-ons – typically only average about 5%. In addition to commissions, bonuses and spiffs make up a large portion of their incentive pay as well.

Travel

Travel agent earnings are made up of a mix of salary, commissions, and other incentives. Their pay can fluctuate significantly month to month or even annually. A travel agent will earn an average salary of $43,810 with commissions averaging between 10-16% of the components of travel arranged, such as hotel, tour, rental car bookings, etc. However, travel insurance can earn agents a much higher commission rate. These commissions can be as much as 20-40% of the policy sold.

Solar Sales

The majority of solar sales reps are paid on a straight commission pay structure without a base salary. Their commission structure can be complicated because their overall sales compensation is based on several different commission calculations methods. However, on average, a solar sales rep will receive a commission rate of about 5-8% of the total sale. 

Solar sales compensation structures also typically include tiered commissions rates. These are variable rates that change depending on the number of sales a rep makes. The more sales a rep makes, the higher tier they are placed in, and therefore, the higher commission rate they earn.

Finance

Financial advisors earn their income through a combination of salary, commissions, and other incentives. Financial advisors employed by a financial firm will receive a base salary plus additional income through commissions and other incentive-based earnings.

A financial advisor’s average salary is $78,500, with earnings from commissions and incentives averaging about $17,800.

Commission Management Software for any Industry

Regardless of the industry, Core Commissions provides all of the tools needed for businesses to fully automate their commission management processes. Core’s affordable and easy-to-use application allows users to easily create dashboards, generate reports, and view analytics to get a comprehensive view into their business operations.

Core’s robust application can handle even the most complex commission structures with ease. Contact us for more information or schedule a free demo to learn how Core can simplify sales compensation for your company.

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