---
title: Commission — what it means and why it matters | Allocate AI
description: Pay earned as a percentage of what you sell, so the amount changes with each deal and each month rather than arriving as a fixed salary.
canonical: https://allocateai.io/glossary/commission
site: Allocate AI — https://allocateai.io
---

# Commission

Pay earned as a percentage of what you sell, so the amount changes with each deal and each month rather than arriving as a fixed salary.

Commission is pay tied to sales. Instead of a fixed amount per pay period, you earn a percentage of the revenue or bookings you bring in. A commission rate of 10% on a $50,000 deal means $5,000 to you, paid on whatever schedule the plan sets: at signing, at invoicing, or when the customer pays.

Most sales roles combine a base salary with commission. The base covers the bills; the commission is the upside. The mix varies a lot: a 50/50 split is common in software sales, while some roles are nearly all commission. The plan also sets a quota, and rates often change above quota through accelerators.

The planning challenge is lumpiness. Deals close at the end of quarters, payments lag by weeks, and a great March can be followed by an empty April. Someone earning $150,000 a year on commission might see $4,000 one month and $25,000 the next. Budgeting off the average works only if the good months actually get saved.

The common mistake is spending against expected commission before it is paid, especially when a deal has verbally closed but the paperwork is not signed. Plans also have clawbacks if a customer cancels early. The safer pattern is to run monthly life off the base, hold a larger cushion than a salaried person would, and treat each commission check as an expected income event with its own date.

[Try the Sales Comp Calculator →](https://allocateai.io/calculators/sales-comp)

## Related terms

- [OTE (on-target earnings)](https://allocateai.io/glossary/ote) — The total a sales role pays if you hit exactly 100% of quota: base salary plus the commission you would earn at target.
- [Accelerator (commission)](https://allocateai.io/glossary/accelerator) — A higher commission rate that kicks in once you pass quota, so every dollar sold above target pays more than the dollars below it.
- [Draw (against commission)](https://allocateai.io/glossary/draw) — An advance on future commission paid to a salesperson, often during a ramp period, that is later deducted from commissions actually earned.
- [Expected income event](https://allocateai.io/glossary/expected-income-event) — In Allocate, a bonus, commission, or stock vest you tell the app about in advance, so the plan counts it as income on the date it is due to arrive.

**Plan in plain language.**

Allocate answers “can I afford this?” from your own numbers, writes the plan, and stages every change for your yes. It starts from an estimate before you link a bank.

[Get started](https://app.allocateai.io/signup)

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Allocate AI is a budgeting and financial-planning app: link your accounts, say what you want in plain words, and it writes the plan and stages every change for your approval. Read more at https://allocateai.io or see all pages in https://allocateai.io/llms.txt.