What is commission pay?
Commission pay (Danish: provisionsløn) is pay that depends wholly or partly on the employee's results, typically a percentage of revenue, order value or gross margin. It is most common for sales reps, but also used for account managers, brokers and agents.
In Denmark the most common form is a fixed base salary plus commission. Commission-only pay exists but is rarer and puts more weight on the written agreement.
The three typical forms
| Form | How it works | Typical use |
|---|---|---|
| Base + commission | Fixed monthly salary, commission on top | Most B2B reps |
| Commission only | All pay is commission | Agents, brokers, some sales roles |
| Commission with a draw | A guaranteed advance offset against commission earned | New hires, long sales cycles |
Example
A rep earns DKK 32,000 a month in base salary and 8% commission on invoiced revenue. In March the rep invoices DKK 250,000.
| Item | Amount |
|---|---|
| Base salary | DKK 32,000 |
| Commission (8% of DKK 250,000) | DKK 20,000 |
| Gross pay in March | DKK 52,000 |
The split between fixed and variable pay is the pay mix. Try your own numbers in the OTE calculator.
Danish rules that apply to commission pay
- Commission is salary. It is taxed as A-income with labour market contribution, and it counts when holiday, sickness and notice pay are calculated.
- Salaried employees keep commission when absent. Under section 9(3) of the Danish Salaried Employees Act (funktionærloven), pay during sickness, parental leave and notice is based on the commission the employee would probably have earned. See commission during sick leave.
- Holiday can trigger compensation. If a rep loses commission because of holiday, the loss must be covered. See holiday pay on commission.
- A draw is not ordinary debt. Under section 9(2), an advance on commission can only be offset against salary or commission owed, not reclaimed as an ordinary debt.
- Terms must be in writing. Pay and other pay components must be stated in the employment contract. See commission agreement.
Pros and cons
| Pros | Cons |
|---|---|
| Pay follows the value the rep creates | Income varies for the rep |
| Payroll cost falls in weak periods | Needs correct data and clear rules |
| Clear motivation and focus | Disputes when the calculation can't be checked |
Commission pay in Prowi
Prowi calculates commission straight from the CRM, shows the rep the amount on their phone when the deal closes, and sends an approved file to payroll. See live commission.
Prowi is not a law firm. This page describes the general Danish rules; collective agreements and individual contracts can give other rights. Talk to your employers' association or a lawyer when money is at stake.
In Prowi
Every term on this page is a rule you can write into a commission model in Prowi. The model reads the deal from HubSpot the second it closes, applies the rule, and the rep sees the result on their phone before the day is over.