Finance

Commission: How to Know If That Sales Job Is Actually Worth It

"OTE £80,000!" screams the job ad. Sounds great, right?

Maybe. Or maybe it's a £30,000 base with a target that nobody hits. The difference matters. If you're considering a commission-based role, or you're already in one and want to understand your pay better, here's what you need to know.

The Basic Maths

Commission is usually a percentage of what you sell. Sell £100,000 of stuff at 10% commission = £10,000 commission. Simple enough. But the details vary wildly.

What's the percentage based on?

  • Revenue (total sale value)
  • Gross profit (sale value minus costs)
  • Net profit (after all expenses)

10% of revenue is very different from 10% of profit. A £100,000 sale with 30% margin means £30,000 gross profit. 10% of revenue = £10,000. 10% of gross profit = £3,000. Always ask what the commission is calculated on.

Common Commission Structures

Straight commission: No base salary. You eat what you kill. High risk, potentially high reward. Common in real estate and some insurance roles.

Base plus commission: A guaranteed salary plus commission on top. Most sales jobs work this way. The split varies — 50/50, 60/40, 70/30.

Tiered commission: The rate increases as you sell more. First £50k at 5%, next £50k at 8%, everything above at 12%. Rewards high performers.

Threshold commission: You only start earning commission after hitting a minimum. Sell £30k before you see a penny of commission. Harsh but common.

Residual commission: Ongoing commission from repeat business. Sell a subscription, get a cut every month it renews. Can build into serious passive income over time.

OTE: The Number That Lies

OTE stands for On-Target Earnings. It's what you'd earn if you hit 100% of your sales target.
OTE = Base salary + Target commission

A job with £40k base and £40k OTE means you need to hit target to earn that extra £40k. Miss target, earn less. Beat target, potentially earn more.

The question nobody asks: What percentage of the team actually hits target? If 80% of salespeople hit OTE, it's a realistic number. If 20% do, that "£80k OTE" is fantasy for most people. Always ask. Good employers will tell you. Evasive answers are a red flag.

The Split Matters

The base/commission split tells you a lot about the role.

High base, low commission (70/30 or 80/20): More stability, less upside for top performers. Often in account management.

Even split (50/50): Balanced risk and reward. Standard for many sales roles.

Low base, high commission (30/70 or worse): High risk, potentially huge rewards. Only take this if you're confident and have savings.

Red Flags in Commission Plans

  • Unrealistic targets. If the target requires selling twice what the previous person did, something's wrong.
  • Vague calculations. "Commission is based on various factors" = they can pay you whatever they want.
  • Frequent plan changes. Good companies don't change commission structures every quarter.
  • Capped commission. If there's a maximum you can earn, top performers will leave.
  • Long payment delays. Commission should be paid promptly, not six months after the sale.
  • Clawbacks without limits. Some clawback for cancelled deals is normal. Clawing back commission from a year ago is not.

Questions to Ask Before Accepting

  1. What's the base salary and OTE?
  2. What percentage of the team hits OTE?
  3. What's the commission rate and what's it based on?
  4. Are there accelerators for exceeding target?
  5. Is commission capped?
  6. When is commission paid?
  7. Are there clawbacks? Under what circumstances?
  8. What's the average deal size and sales cycle?
  9. How are leads generated?
  10. What territory or accounts would I have?

If they won't answer these clearly, walk away.

Calculating Your Realistic Earnings

Don't just look at OTE. Model different scenarios.
At 80% of target: Base + (Target commission × 0.8)
At 100% of target: Base + Target commission
At 120% of target: Base + Target commission + (Accelerator on the extra 20%)

If 80% of target still pays your bills, the job might be worth the risk. If you need 100%+ just to survive, think carefully.

The Tax Bit

Commission is taxed as normal income. It gets added to your base salary and taxed through PAYE. Big commission months can feel painful because more of your income hits higher tax bands. But over the year, it evens out.

The Honest Truth

Commission-based roles can be fantastic. Top performers in good companies earn serious money. But they can also be traps. Unrealistic targets, bad products, poor territories — these things aren't your fault, but they'll tank your earnings anyway.

Do your homework. Ask the hard questions. And if the numbers don't add up, the job isn't as good as it sounds.

Related Calculators

Model your earnings with these tools:

commission,sales,OTE,compensation