Commission Calculation Options
When you create a commission schedule, you can choose one of three methods to calculate commission:
-
Flat Rate Calculation Scale – The schedule calculates commission with a constant rate.
-
Marginal Calculation Scale – The schedule is divided into brackets with different rates. NetSuite awards commission for each bracket at the rate you enter for that bracket
-
Linear Calculation Scale – The schedule is divided into brackets with different rates. NetSuite awards commission at the rate in the highest bracket fulfilled by the sales total.
You use the Calculation Scale setting on the Commission Schedule page to choose how NetSuite calculates commission.
Flat Rate Calculation Scale
If you choose to calculate commission with a flat rate, enter a single currency amount or percentage for each row in your commission matrix.
The following are some examples of flat rate commission schedules:
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Offering 4% of total sales in commission
-
Rewarding a $100 “kicker” for each computer system sold
Marginal Calculation Scale
Commission calculated on a marginal scale looks separately at the commission in each bracket.
NetSuite applies each percentage or amount you enter in the matrix only to the amount included in that bracket. NetSuite awards commission for each bracket at the rate you enter for that bracket.
In some cases, a transaction may cause a sales rep to qualify for a higher commission bracket. The portion of the transaction in the lower bracket receives the commission rate for the lower bracket. The portion of the transaction in the higher bracket generates commission at the rate of the higher bracket.
The exceptions to this are sales-based and quota-based commission schedules that consider categories for the purpose of commission payout, for example, when you selected Payout Only in the Categorization Applies To field. When a transaction makes the sales total for the period qualify for the next bracket, NetSuite applies this bracket rate to the entire transaction.
For example, if a schedule awards commission based on sales by period using a marginal scale, the commission matrix would look like this:
A rep with this schedule in their plan would earn commission on the following transactions:
|
Tran. # |
Transaction Amount |
Period Total |
Commission |
Notes |
|---|---|---|---|---|
|
1 |
$8,000 |
$8,000 |
$0 |
No commission is earned until the transaction total for the period reaches $10,000. |
|
2 |
$3,000 |
$11,000 |
$40 |
The first $2,000 of this transaction earns no commission. $1,000 of this transaction generates 4% commission, or $40. |
|
3 |
$5,000 |
$16,000 |
$202.50 |
The first $4,000 of this transaction earns $160, or 4%. The other $1,000 of this transaction generates 4.25% commission, or $42.50. |
|
4 |
$2,000 |
$18,000 |
$85 |
This entire transaction is within the 4.25% bracket. |
The total commission for the period (the sum of the Commission column in this example) is $327.50.
A rep assigned a quota-based schedule on a marginal scale that categorizes by class to determine payout only, would have the following commission matrix:
In this example, the rep's overall quota for the period is $10,000. Their sales and commission amounts for the period are the following. The fourth column shows how much of each transaction is classified as recurring business.
|
Tran. # |
Transaction Amount |
Period Total |
Recurring Business Amount |
Commission |
Notes |
|---|---|---|---|---|---|
|
1 |
$8,000 |
$8,000 |
$4,000 |
$0 |
No commission is earned until the transaction total for the period reaches $10,000. |
|
2 |
$2,500 |
$10,500 |
$1,000 |
$30 |
Because this transaction brings the total into the second bracket, the commission rate of 3% is applied to the recurring business amount of the whole transaction. |
|
3 |
$1,000 |
$11,500 |
$1,000 |
$35 |
This transaction qualifies for the 3.5% rate in the third bracket. |
|
4 |
$2,000 |
$13,500 |
$5,000 |
$225 |
This transaction qualifies for the 4.5% rate in the highest bracket. |
The total commission earned for the period (the sum of the Commission column) is $290.
Linear Calculation Scale
For commission schedules that use a linear calculation scale, NetSuite applies the highest qualified bracket rate to the total sales for that period or transaction.
When the lowest commission bracket is reached, NetSuite does not calculate the eligible total or calculated amount for the sales order. For example, using the schedule shown, if a commission transaction base amount is below the first bracket, calculated and eligible amounts are zero.
This differs from the marginal calculation scale, which awards the sales amounts in each bracket at that bracket's rate. For example, a schedule awards commission based on sales that use a linear scale have a commission matrix like this:
A rep with this schedule in their plan made $22,000 in sales during the period, the commission amount is 4.35% of $22,000, or $957.
Target Factor Commission
If you create a schedule based on quota that uses a linear scale, choose Target Factor for the Rate setting. These schedules award a percentage of the target factor as commission. NetSuite determines the percentage by the percentage of quota met, for example, a schedule awards commission based on quota and calculates commission amounts from a target amount of $10,000. If a rep with this schedule in their plan made 125% of their quota, they would earn $7,500, computed as follows:
factor of quota attained * attainment bucket factor * target amount
1.25 * .60 * 10,000
Sales transaction pages such as Sales Order, Invoice, Credit Memo, Cash Sales, Cash Refunds, and Return Authorizations have an Exclude Commissions box. If a user checks this box on a sales transaction page, NetSuite excludes the transaction and its subordinate transactions from inclusion in commission calculations. For example, if a user checks this box on a sales order, NetSuite excludes the sales order and the subsequent invoice from all commission calculations for all sales people.