Commission, piecework and other income

Flat and sliding-scale commission, retainers, piecework, royalties, earning as a sole trader, and government payments with an income test.

Not everyone is paid for their time. A real estate agent is paid for houses sold, a fruit picker for bins filled, an author for books sold and a plumber for jobs done. These ways of earning reward output instead of hours, which can pay very well in a good month and very badly in a slow one.

Commission

Commission is a percentage of the value of what you sell. Some salespeople get commission only. Others get a retainer, a fixed amount paid whatever they sell, plus commission on top.

Example 1●

An agent in Parramatta sells a house for $\$1{,}250{,}000$ and earns $2\%$ commission. Find the commission.

$0.02 \times 1\,250\,000 = \$25\,000$

2% means 0.02 times the sale price.

That sounds like a lot for one sale. But the agent may go months without a sale, and out of commission they often pay for their own car, phone and advertising.

Sliding-scale commission

A sliding scale pays a higher rate on sales above set thresholds, to reward the best sellers. It works like a staircase: each rate applies only to the sales inside its band.

Example 2●●

Zoe sells solar panels. She earns a retainer of $\$450$ a month plus commission of $3\%$ on the first $\$20{,}000$ of sales, $5\%$ on the next $\$30{,}000$ and $8\%$ on sales above $\$50{,}000$. One month she sells $\$64{,}000$. Find her pay.

$0.03 \times 20\,000 = \$600$

The first band is the first 20 000 dollars of sales.

$0.05 \times 30\,000 = \$1500$

The next band is 20 000 to 50 000 dollars, which is 30 000 dollars of sales.

$0.08 \times 14\,000 = \$1120$

Only the sales above 50 000 dollars earn 8%: 64 000 − 50 000 = 14 000.

$450 + 600 + 1500 + 1120 = \$3670$

Add the bands and the retainer.

InteractiveSliding-scale commission

Try this

Check Example 2: $\$64{,}000$ of sales with a $\$450$ retainer. Then find the sales that give Zoe exactly $\$3000$ of commission.

Slide the sales from $\$49{,}000$ to $\$51{,}000$. Why does the commission go up smoothly instead of jumping?

Piecework and royalties

Piecework pays a fixed amount per item made or task done. Fruit picking, letterbox drops and some sewing work are paid this way. Since 2022, pieceworkers under the horticulture award must still earn at least the minimum hourly rate, after cases where pickers were earning a few dollars an hour.

A royalty is a percentage paid to the owner of intellectual property, such as an author, songwriter or game developer, each time their work is sold or used.

Example 3●

(a) A blueberry picker near Coffs Harbour is paid $\$45$ per bin and fills $7$ bins in a day. (b) An author earns a $10\%$ royalty on a novel that sells $4500$ copies at $\$32.99$. Find each income.

(a) $7 \times 45 = \$315$

Piecework: number of items times the rate per item.

(b) $0.10 \times 4500 \times 32.99 = \$14\,845.50$

Royalty: 10% of total sales. Total sales = 4500 × 32.99.

Sole traders

A sole trader runs their own business, like a plumber, hairdresser or tutor working for themselves. Their income is what is left after business costs:

Sole trader income

$$\text{Profit} = \text{money earned from customers} - \text{business expenses}$$

Sole traders have no employer, so nobody pays their super, sick leave or holiday pay. They pay their own tax (often in quarterly instalments) and must register for GST once their turnover reaches $\$75{,}000$ a year. That's why a sole trader's hourly charge looks high next to a wage.

Example 4●

A plumber earns $\$2800$ from jobs in one week and spends $\$640$ on parts, fuel and phone. Find the week's profit.

$2800 - 640 = \$2160$

Profit is earnings minus expenses.

Government payments

Centrelink pays allowances and pensions such as Youth Allowance, JobSeeker and the Age Pension. Most have an income test: earn more than a set amount and the payment is reduced. The amounts change every March and September, so the numbers below are only an example.

Example 5●●

Suppose a student's payment is $\$620$ a fortnight, reduced by $50$ cents for every dollar they earn over $\$539$ in the fortnight. Find the payment when they earn $\$700$.

$700 - 539 = \$161$ over the limit

Only the earnings above 539 dollars count.

Reduction $= 0.5 \times 161 = \$80.50$

50 cents for each of those dollars.

$620 - 80.50 = \$539.50$

Subtract from the full payment.

Your turn

Using Zoe's scale (no retainer), find the commission on sales of $\$72{,}000$.

Show the working

$3\%$ of $\$20{,}000$ is $\$600$. $5\%$ of $\$30{,}000$ is $\$1500$. The rest is $72\,000 - 50\,000 = \$22\,000$ at $8\%$: $\$1760$. Total: $600 + 1500 + 1760 = \$3860$.

Flashcards

Commission

A percentage of the value of sales

Retainer

A fixed payment made whatever the sales

Sliding scale

Each rate applies only to the sales inside its band

Royalty

A percentage paid to the owner of a creative work each time it sells

Practice

An agent earns $2.5\%$ commission on a $\$640{,}000$ sale. Find the commission.
A salesperson gets a $\$500$ retainer plus $4\%$ of sales. Find their pay for sales of $\$18{,}000$.
Commission is $3\%$ on the first $\$20{,}000$ of sales and $5\%$ on sales above that. Find the commission on $\$35{,}000$ of sales.
A worker is paid $\$0.85$ for each item packed. Find the pay for $420$ items.
A songwriter earns an $8\%$ royalty. $3000$ copies sell at $\$25$ each. Find the royalty.
Which is a disadvantage of being a sole trader compared with being an employee?
A hairdresser working for herself earns $\$4200$ in a fortnight and has $\$1350$ of expenses. Find her profit.
Using the payment in Example 5 ($\$620$ reduced by $50$ cents per dollar earned over $\$539$), find the payment when the student earns $\$800$.
Exam style: Zoe's scale is $3\%$ on the first $\$20{,}000,$ $5\%$ on the next $\$30{,}000$ and $8\%$ above $\$50{,}000,$ plus a $\$450$ retainer. Find her pay when she sells $\$59{,}000$.
Exam style: A salesperson on $6\%$ commission (no retainer) earned $\$2970$ one month. Find the value of their sales.