Commission pay is a flexible and highly lucrative form of compensation

 that’s suitable for sales, finance, and even real estate jobs. It entails a distinct performance evaluation and payout structure, making it a must to know how to prepare a commission pay stub.

But to understand how to incorporate commissions and incentives in paycheck stubs, independent contractors and employers must also broaden their existing knowledge on what a commission-based income is all about, its pros and cons, and different classifications.

We’ll cover all the information in this article, so keep reading to learn more.

Commission pay is given to employees who make a living either by earning commissions alongside their base salaries or by generating a purely incentive-based income.

It is essential to choose a suitable pay stub template and input accurate and complete values to reflect the correct data in a commission pay stub.

The five most commonly used types of commission pay include salary plus commission pay, straight commission, variable commission, bonus commission, and residual commission.

Negotiating commission rates will depend on the employee’s skill, level of expertise, and overall earning potential.

A typical example of this is how sales personnel are paid an additional percentage on top of their income after they have met a specific sales goal or metric. This is otherwise known as 

Unlike a fixed salary, where earnings are determined by set hourly or daily rates, commissions are not bound by fixed rates and therefore enable more flexible and lucrative income potential.

Commissions are earned either as a combination of an 

employee’s base compensation plus commission or as an added bonus

. Businesses use commission pay to reward employee performance. Alternatively, with a purely commission-based salary, employees have more freedom to boost their daily earnings.

Since commissions are synonymous with limitless earning potential, the important question is: how does commission-based pay work? There are varying factors to consider in assessing how to implement commissions, allowances, or bonuses.

Employers typically prepare a set of key performance indicators (KPI)

 when determining commission percentages. For instance, Jenny, a lead generation specialist at a marketing agency, has to bring in at least five new prospects every month to qualify for a 3.5% bonus.

Another benchmark used to measure allowances and commissions is the number of

 sales or successful upsells per transaction

. Let’s say Mark is entitled to a 10% commission every time he closes a sale worth over $500. On top of that, he also gets an additional 5% for every successful upsell.

One day, Mark was able to sell $600 worth of retail products and even upsell additional items worth $250. Since Mark made a total of $850 in sales, he is entitled to a 15% incentive.

For employees who are paid through a base salary plus commission, their earnings may comprise 50-50 commissions and base salary, or 40% commission and 60% fixed rates.

The proportions may vary based on the nature of the job, the competition in the market, or the company’s target revenue.

Since bonuses and incentives are unlike regular wages and salaries, there are specific steps in preparing a commission pay stub.

Here’s how to add commission-based earnings to your pay stub using our paystub generator:

. Each of our templates is meticulously designed to suit different business and branding requirements.

. Make sure you fill in the blank fields with the correct information.

base salary and the commission or bonus earned by your employee

. Our commission pay stub generator comes with a calculator, making it easier to consistently have correct and accurate values in your commission pay stub.

 you’ve inputted into your pay stub to see whether you missed an important field or provided the 

If you’re satisfied with your pay stub, 

Did we mention that you can generate more than one commission pay stub with our generator? That’s right, create as many as you need without breaking a sweat!

Some of the most common commission pay examples are:

ixed salary combined with a set commission

 is the most widely used form of commission pay. It is also the easiest to input into a commission pay stub. In this setup, the salary rates are barely enough to provide a stable income source, and so the commission pay is meant to compensate for the low wages.

Contrastingly, the base salary is meant to provide a ‘

’ for when sales take a downward trajectory. Some employers use a fixed salary amount, while others apply hourly rates for the base compensation.

Sales and retail jobs usually adopt salary plus commission compensation because it effectively strikes a balance between investing in employees regardless of how well they meet the commission metrics and pushing employees to concentrate on honing their skills to hit the sales goal.

purely commission-based way of generating income

. It does not have a fixed salary to serve as a security blanket whenever sales are low.

The commission is fairly high in this structure

 since it is not paired with any other form of compensation. A person who makes money through straight or 100% commission is considered an independent contractor and therefore does not require the use of a commission pay stub.

they are not obligated to cover a contractor’s benefits, taxes

. In short, hiring independent contractors to do a purely commission-based job means cutting down on employment costs.

non-committal and potentially high-reward structure

 of earning a straight commission. Others may feel too pressured to keep up with the target metrics and end up switching to jobs with a fixed and more stable rate.

 to employees. It is a type of incentive often used in the sales industry.

In determining variable commission rates, employers can either use a 

. A flat-rate commission takes an employee’s 

 into consideration to ensure the set amount justifies the performance.

If an employer uses a tiered commission plan, employees are subject to 

 and exceed their accomplishments while they’re at it.

For example, a sales associate starts with a 10% incentive for every $50,000 worth of generated sales and ends up with a 30% commission if they showcase consistently good performance and deliver more than twice the sales objective.

If an employee has a bonus commission declared on their commission pay stub, that means their bonus is 

based on the total revenue they have generated in a given period

taken from a portion of the company’s total profit.

An example of how bonus commission works is when a sales representative earns a bonus commission for selling over 500 computer units or is granted $30,000 in commission for closing an exclusive and large-scale deal.

Out of all the different types of commission pays, residual commission stands out because it entails a 

. Residual commissions are given when an employee acquires a high-profile client or closes an exclusive deal for the company.

That said, they may earn a recurring amount every payday from a client or account.

Advantages & Disadvantages of Commission Pay

The following are the advantages and disadvantages of earning commission-based income:

 who are extremely good at what they do are capable of increasing their commissions at a steady and consistent rate. Individuals who are adaptable and able to hone their skills while working under pressure will also thrive on a commission-based income.

. Commissions are directly tied to each employee’s individual performance. That means their earnings are proportionate to the effort and hard work they’ve invested to meet their KPIs. In contrast, a fixed salary rate has a tendency to overlook differences in performance and is mostly focused on the number of hours completed in a pay period.

 depends on whether an individual is a regular employee of a company or works as an independent contractor. The amount withheld from a regular employee’s commission is based on their Form W-4, while an independent contractor’s tax contributions are reported on their 

At the same time, if the commission is paid separately from an employee’s base salary, employers must assess whether to use the aggregate or percentage method to determine the amount to withhold from the commission.

The aggregate method combines the base pay and commission rates and imposes regular income tax rates on the consolidated amount. The percentage method deducts a fixed 22% from commissions.

. The pressure of earning money through commissions is not something that anyone can handle. Specifically, sales is a skill that requires grit, active listening skills, tenacity, and flexibility.

Without these core competencies, it would be impossible for a sales rep to meet their quota or bring in measurable results. A 100% commission-based pay setup is also not ideal for individuals who need a stable and fixed income to pay for their basic needs.

yes; commissions are open for negotiation

discuss and explore a suitable commission rate with their employees

A sales representative or real estate broker with years of experience in their respective field is more entitled to set a starting rate that 

. Conversely, employees with a fairly competent skill level typically bargain for a higher bonus or commission percentage the more deals they close and sales they make.

Employees or independent contractors earning residual commission can be entitled to a higher bonus if they 

upsell a client’s existing subscription

 to a more expensive plan or entice customers to extend their contract and purchase more items from the business.

To summarize, commission-based income boils down to 

In response, a commission pay stub is meant to enumerate performance-based bonuses and earnings. While it may be relatively easy to reflect commissions on a regular pay stub, determining the ideal percentages and suitable timing for negotiating rates is tricky and requires careful consideration.

Alternatively, you can also take the practical route and use our paystub generator, which enables you to quickly produce many pay stubs and minimize errors in calculating your employees’ gross and net earnings.


A commission pay stub records incentives or bonuses earned besides an employee's base pay. Read this article to understand how it works.

How to Add Commission to Your Pay Stub [Full Guide]

A successful transaction might depend on your 

understanding of the differences between a purchase order vs invoice

, particularly in terms of when they are used and what purpose each document serves.

Invoices and purchase orders are instrumental in evaluating the progress of your business. Not only that but both invoices and purchase orders are instrumental in protecting both businesses and their customers.

This article will delve into the distinctions between a purchase order and an invoice, as well as the different variations for each document and more.

A purchase order is a document sent by a customer or buyer to a vendor to inform them of the goods and services that they want to acquire.

An invoice is issued by the vendor to demand payment from the customer. It is sent upon fulfilling the goods purchased or the services requested.

Aside from knowing how to distinguish a purchase order vs invoice, it is important to note that sellers need both documents to secure profits and monitor potential losses.

In terms of identifying when to use a purchase order vs invoice, purchase orders are used to commence a transaction, while invoices are used to complete a sale.

, is a document containing a list of goods or services that a customer wants to acquire from a business or seller.

Compared to a simple inquiry, a purchase order is the 

 because when customers send a purchase order, it means they are not just interested in learning more about the products. Rather, they have made the decision to buy from the business.

electronically via email or mail them to the seller’s business address

. Once the seller acknowledges the details in the PO, it becomes a contractual agreement between the seller and their customer.

. It itemizes all the goods and services that the customer procured, along with the price per unit, 

, due date, and the total amount for the order.

after they have completed and delivered the goods and services in the purchase order

. In other words, it succeeds the purchase order in a normal transaction and commences the time frame for when customers must complete their payment.

Unless accompanied by a contract or agreement signed by both the seller and buyer, 

What Are Differences Between a Purchase Order and an Invoice?

It’s easy to differentiate a purchase order vs invoice; just bear in mind the following key factors:

Purchase orders are sent to request goods and services

, while invoices are sent to request payments from customers in exchange for delivering the items in the purchase order.

Invoices contain the payment terms, cost per unit, and amount

 to be paid by the customer. Purchase orders simply itemize the products for procurement and the corresponding costs.

Purchase orders are issued before a sale is made

. Invoices follow a purchase order in that businesses send them to customers as a form of affirmation and adherence to their request.

 and do not require a customer’s signature for validation. Purchase orders require both the customer’s and the seller’s signatures for legal implications.

Purchase orders do not include the taxes applied to the sale

. Invoices specify the taxes imposed on the total price of the goods for transparency and compliance with federal, state, or local regulations.

Here is a quick summary of the key differences between a purchase order vs invoice:

What Information Goes on a Purchase Order

Purchase orders must contain the following information:

date when the buyer created and issued the PO.

, while the shipping address is the location where the seller will deliver the goods. The seller’s name and business address represent the name of the party who 

provides the goods and their base of operations.

enumerates all of the goods or services that the customer wants to procure

 from the business. Next to the itemization of the products is the 

, followed by the total cost of the order.

 to track the progress of each procurement.

PO numbers are an essential part of every transaction. It assures the customer that 

 and is in the process of fulfilling it for them. In return, sellers use the PO number to 

keep their inventory and sales organized and up-to-date.

 also take on different forms, depending on their usage.

The different types of purchase orders are as follows:

Standard purchase orders are used for processing 

. Examples of infrequent and one-time purchases include ordering food at a restaurant or purchasing goods from a store or an online shop.

client orders with definite start and end dates on the contract

purchases that require specific adjustments

 in terms of the maximum number of orders allowed.

A planned purchase order is similar to a standard purchase order in that it contains the complete list of goods ordered, the costs, and all the necessary details you would find in a typical PO. The only difference in a planned purchase order is that it is 

meant for long-term purchases with tentative delivery dates.

flexible agreements between a seller and their customer

. It contains distinct delivery dates, details of the products that the seller agreed to provide, and other deliberate guidelines that govern the transaction.

Purchase orders are used mainly by customers to 

communicate their desire to procure or acquire a seller’s services or products

. A buyer can be an individual, a fellow vendor, or a business.

For businesses and vendors, the purchase order is created when the vendor wants to 

. Businesses also issue a PO when they outsource services and resources to external companies.

But more than acquiring goods or services, a duly fulfilled PO serves as a legally binding contract that 

holds both the customers and the sellers accountable

 for their end of the transaction. Vendors are obliged to provide the items requested in the purchase order, and the customers must give the proper compensation as indicated in the purchase order and invoice’s terms.

Let’s explore the importance of purchase orders further by taking a look at the following functions they take on in every transaction:

One of the easiest ways to identify a purchase order vs invoice is by figuring out at what point of the transaction each document is used.

Sellers need a reliable and complete reference when creating their invoices. It is important for invoices to 

reflect the same information on the purchase order

; otherwise, they must reflect any changes made prior to the delivery of the goods.

At the same time, purchase orders ensure sellers 

and set correct payment terms that adhere to the customer’s needs and limit instances of non-payment.

vendors can track the progress of each client's order more easily

. They can assign purchase order numbers to each client and monitor the progress of the purchase. Also, sellers use the PO to manage 

This is true for suppliers because they typically cater to clients who order goods in bulk.

In B2B transactions between the seller and the client, the purchase order may indicate a specific set of conditions agreed upon by the seller and the client in terms of negotiating the rates, the expected deliverables, and even the invoicing dates.

Unlike invoices, wherein only the seller has to verify the contents of the document, 

purchase orders require the acknowledgment of both the seller and the buyer

. This is to certify that both parties have reached a mutual consensus with regard to the order, costs, payment terms, and other conditions needed to carry out the exchange of goods and services.

A typical invoice contains the following information:

Business or seller name, contact information, and address

Customer or buyer name, contact information, and address

Itemized list of the products and services provided

Cost per item/Rate per hour (if a customer requested services)

Discounts and other adjustments, if applicable

The invoice number is similar to the purchase order number in that it is a 

 to monitor customer payments more easily. The date on the invoice is the 

While there are clear variations between the uses and format of a purchase order vs invoice, there are a couple of details that both documents share in common: Seller information and customer information.

Providing the name, address, and contact information of both the business and the customer at the top of the invoice clarifies

An itemized list of the products or services, including the costs and rates, guarantees the seller charges the customer according to their contract.

on any regulations or promotions that apply to the sale.

Finally, the total amount in the invoice is the price that customers must fulfill to complete their purchase.

Below are some of the different types of invoices used by vendors and businesses:

. It is issued by a seller to the customer to request partial or full payment even before the goods are completed and delivered.

. This type of invoice is essential for importing and exporting goods as well as regulating foreign exchange processes.

. Consultants and consulting firms create invoices to list all the services and equivalent rates provided to their clients.

. It is used when the seller has to process refund requests. A seller may also use credit invoices to make adjustments to a customer’s previous order.

. Issuing a deposit invoice means the vendor requests payment from the buyer in the form of a bank deposit.

. Pro forma invoices are used to provide the buyer with an estimate of the goods and services. Proforma is used only when the buyer has committed to continuing their purchase.

 Recurring invoices are created for services that are continuously requested by a client over a set period of time.

. This type of invoice applies to businesses that charge customers based on the type of services they provide. It is commonly used for housekeeping and tutoring services.

It is used by small businesses to collect payments from their clients in exchange for acquiring their goods or services.

. The standard invoice is the default or regular invoice that is used in most typical business operations and simple transactions. Restaurants, retail stores, and even small businesses that cater to locally-based customers use standard invoices.

. A sundry invoice is created for miscellaneous fees and customers who, from time to time, purchase items using credit.

Learn the difference between purchase orders vs invoices, and how they differ in use, legal implications, and content.

Purchase Order vs Invoice: Difference, Uses, Types, & Importance

Your pay stub is more than just a document that shows how much money you are making every payday. In fact, once you learn how to get a pay stub and the different ways to do it, you will understand the key purposes and benefits of having copies of your paycheck ready for you to use.

For instance, you may be unemployed, or you may have suffered from an accident that left you unable to work for a significant amount of time. On the other hand, you may also be currently employed, but you need valid proof of income to qualify for a mortgage or a loan.

 in case you are unable to acquire or create one. Let’s start!

A pay stub is issued by employers and records an employee’s gross and net wages, withheld taxes, and deductions in a given pay period.

Through payroll or an employee portal, contacting your bank or previous employer, and using a pay stub generator are all examples of how to get your paycheck stub.

Printing and saving copies of your pay stub saves you time, effort, and resources for when you might need to provide valid proof of income later on.

Pay stubs are useful for filing taxes and increasing your chances of getting approved for loans and renting residential properties.

A pay stub is a document that contains an 

 applied to their earnings. It is also called a payslip, paycheck stub, or earnings statement.

Depending on which type of pay period a business follows, pay stubs may be created weekly, 

Employers are responsible for preparing and issuing pay stubs to their employees every payday. Pay stubs are also crucial in establishing trust and transparency between employers and employees.

More precisely, an employee’s earnings statements come in handy in ensuring that:

. For employees, their pay stub helps them verify whether they are paid according to the hourly rates set on their employment contract.

Employers withhold a percentage of salaries for taxes and benefits

. Aside from calculating their pay, employees also use their paycheck stub to verify that their taxes and benefits are duly withheld and covered by employers.

 when they want to rent an apartment, apply for a car loan, qualify for housing, or use any other type of credit.

If you are wondering how to get a pay stub for 

, securing a loan, or renting property, there are two ways you can secure a copy of your earnings statement:

Learn how to get a pay stub from your bank and your current or previous employer, and learn what you can use instead of pay stubs.

Blog

How to Add Commission to Your Pay Stub [Full Guide]

Purchase Order vs Invoice: Difference, Uses, Types, & Importance

Where and How to Get a Pay Stub + How to Use It

Quote vs. Invoice: Differences & When to Use Them

Pro Forma Invoice: Meaning, Uses, Required Information & More

What is a Receipt? [Definition, Examples, IRS Rules]

Everything You Need to Know About Electrician Invoices

The Ultimate Independent Contractor Paystubs Guide [2023]

Self-Employed Invoice Explained and How to Create It Easily

Tax Loopholes for All Classes That Could Save You Big Bucks