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Commission and Brokerage

This document discusses commission and brokerage. It defines commission as a percentage-based payment made to salespeople for goods sold. Commission aims to align employee and firm interests by basing pay on sales. Brokerage involves an individual or firm that arranges transactions between a buyer and seller for a fee. Common commission structures include straight commission, salary plus commission, and commission calculated on target earnings. The document also provides examples of commission calculations.

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Simran Jit
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326 views10 pages

Commission and Brokerage

This document discusses commission and brokerage. It defines commission as a percentage-based payment made to salespeople for goods sold. Commission aims to align employee and firm interests by basing pay on sales. Brokerage involves an individual or firm that arranges transactions between a buyer and seller for a fee. Common commission structures include straight commission, salary plus commission, and commission calculated on target earnings. The document also provides examples of commission calculations.

Uploaded by

Simran Jit
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Commission

and
Brokerage
By: Simranjit Singh
Roll no: 51

Commission
The payment of commission as remuneration

for services rendered or products sold is a


common way to reward sales people.
Payments often will be calculated on the basis
of a percentage of the goods sold. This is a
way for the firms to solve principal-agent
problem, by attempting to realign employees
interests with those of the firm.

Although many types of commission systems

exist, a common form is known as on-target


earnings, where commission rates are based
on the achievement of specific targets that
have been agreed upon between
management and the salesperson.
Commissions are intended to create a strong
incentive for employees to invest maximum
effort into their work.

Note that often a firm embracing a

commission structure may not involve


employees, but may solely establish
themselves using independent contractors. An
example of this in the USA could be a real
estate agent.

Reward in the form of commission alone with

no pay or salary in the USA is known as


straight commission. Reward may also take
the form of commission plus a fixed salary.
Industries where commission is commonly
paid include car sales, property sales,
insurance broking and many other sales jobs.

Types of Commission
Base plus commission
Draw against commission
Residual commissions
Salary plus bonus
Salary plus commission
Straight commission
Variable commission

Brokerage
A broker is an individual or party(brokerage

firm) that arranges transactions between a


buyer and a seller for a commission when the
deal is executed. A broker who also acts as a
seller or as a buyer becomes a principal party
to the deal. In other words the agents who
settle the sale and purchase of goods between
two parties as a mediator is called as a broker
and the commission paid to his services is
said to be brokerage.

Types of brokerage firms


Captive brokers
Independent brokers
Full service brokerage firms
Discount service brokerage firms
Deep discount brokerage firms
Online discount brokerage firms

Problems on commission and


brokerage
An agent receives 10% commission on sale of

goods. The amount of sales is


15000rupees.Find commission ?
Sol. Commission =
amount of sales*percentage of
commission
100
therefore, commission =
15000*10
100
= 1500 rupees.

An agent receives 1275 rupees as commission

@ 7.5% on sales . Find the amount of sales?


Sol. Amount of sales =
amount of commission*100
rate of commission
Therefore, amount of sales =
1275*100
7.5
= 17000 rupees

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