Payout is the actual amount a salesperson receives in commission or bonus for a given period. Payout differs from earned commission, as it can be affected by factors such as approval processes, clawbacks, advances, and tax withholdings. According to Pavilion (2024), clear visibility into payouts is the most important factor for rep satisfaction with compensation.
The path from sale to payout involves several steps:
| Step | Description | Status |
|---|---|---|
| 1. Earning | Deal closes, commission calculated | Earned |
| 2. Verification | Deal data confirmed | Under review |
| 3. Approval | Manager approves calculation | Approved |
| 4. Processing | Transferred to payroll system | Pending payout |
| 5. Payout | Amount paid to account | Paid |
| Component | Amount |
|---|---|
| Earned commission this month | +$12,000 |
| Milestone bonus | +$3,500 |
| Clawback from churned customer | -$1,700 |
| Draw repayment | -$1,100 |
| Gross payout | $12,700 |
| Tax withholdings (~30%) | -$3,810 |
| Net payout | $8,890 |
| Factor | Effect on Payout | Example |
|---|---|---|
| Clawbacks | Reduces | Customer churns within 90 days |
| Draw repayment | Reduces | Recoverable draw deducted |
| Corrections | Increases/reduces | Error in previous calculation |
| Commission cap | Limits | Maximum payout reached |
| Split commission | Reduces | Deal split with colleague |
Different companies use different payout frequencies:
| Frequency | Advantages | Disadvantages |
|---|---|---|
| Monthly | Steady cash flow, easy planning | Administrative burden |
| Quarterly | Reduced admin, aligned with goals | Long wait time |
| Per deal | Immediate reward | Uneven income |
According to WorldatWork (2024), 78% of sales reps prefer monthly payout.
Transparency: Show reps exactly how their payout is calculated.
Predictability: Maintain fixed payout dates so reps can plan.
Detail: Break down payout into components (commission, bonus, deductions).
Accessibility: Provide access to historical payouts and pending amounts.
If a deal is reduced or canceled after payout, the company can require clawback in future payouts.
Most plans pay out earned but not yet paid commission. Unearned amounts (e.g., pending approval) may be forfeited - define this clearly in the commission plan.
Typically not - most companies set a floor at $0. Clawbacks and draw repayments are spread across future payouts.
Manual payout calculations are error-prone and time-consuming. With Prowi, you can automate the entire payout process from earning to disbursement, give reps real-time visibility, and reduce errors.