Commission and Leave Loading
Commission and Leave Loading in NSW Year 10 Core maths looks at ways of earning that are not a simple hourly wage (NESA outcome MA5‑FIN‑C‑01). Commission is a percentage of sales, piecework pays per item, royalties pay a share of each sale, and leave loading is an extra \(17.5\%\) on pay for annual leave.
You will calculate commission for phone, car and real estate sales, including a retainer plus commission and tiered rates, and find a commission rate or a sale price working backwards. You will also calculate piecework and royalty payments, bonuses, and holiday pay with leave loading, and compare pay plans to find the sales level where they pay the same. It is part of Year 10 Core Earning Money.
Theory
Commission is a percentage of sales; piecework pays for each item; a royalty is a percentage of each item's price; leave loading is an extra \(17.5\%\) on holiday pay. This Year 10 maths page shows how to calculate each one and how to work backwards to a rate or a sales figure.
Commission is pay worked out as a percentage of the value of sales. A retainer is a fixed amount paid each week or month as well, whether or not anything is sold. Some jobs pay one rate on the first part of the sales and a different rate on the rest, or pay commission only on sales above a set amount.
Piecework pays a fixed amount for each item made or job done. A royalty is a percentage of the price of each item sold, paid to an author, musician or inventor. A bonus is an extra payment, often a percentage of yearly pay.
Workers on annual leave are paid their normal pay. Many also get leave loading: an extra \(17.5\%\) of the normal pay for the weeks of leave.
How to calculate pay from commission or loading
- Find the amount the percentage applies to: total sales, the sales above a set amount, the price of one item, or the normal pay for the leave weeks.
- Change the percentage to a decimal and multiply.
- Add any retainer, normal pay or other parts, including weeks with no sales.
Working backwards and comparing
- Commission rate: commission \(\div\) sales \(\times 100\%\). Take off any retainer first.
- Sales from commission: commission \(\div\) rate. With two rates, take off the commission from the first band, then divide what is left by the second rate and add the first band back.
- Normal pay from holiday pay: divide by \(1.175\), then by the number of weeks and the hours if an hourly rate is needed.
- A share of a commission: an agency's commission can be split, so find the commission first, then the agent's percentage of it.
- Piecework or hourly? Work out the piecework pay for one hour (items per hour \(\times\) rate per item) and compare it with the hourly rate.
- Two pay plans: find the gap between the fixed amounts and divide by the commission rate to find where they pay the same (Example 4).
- Bonus per day early: find one day's bonus, multiply by the number of days, then add the contract price if the total is asked for.
Split the sales at \(\$20\,000\) and apply each rate to its own part.
| \(3\% \text{ of } \$20\,000\) | \(=\) | \(0.03 \times 20\,000\) |
| \(\) | \(=\) | \(\$600\) |
| \(\text{sales above}\) | \(=\) | \(\$34\,500 - \$20\,000\) |
| \(\) | \(=\) | \(\$14\,500\) |
| \(5\% \text{ of } \$14\,500\) | \(=\) | \(0.05 \times 14\,500\) |
| \(\) | \(=\) | \(\$725\) |
| \(\text{pay}\) | \(=\) | \(\$380 + \$600 + \$725\) |
| \(\) | \(=\) | \(\mathbf{\$1705.00}\) |
Using \(5\%\) on all of the sales would overpay her. Each rate belongs to its own part.
(i) A tiler is paid \(\$3.20\) for each tile laid. How much does he earn for a day in which he lays \(145\) tiles?
(ii) A songwriter receives a royalty of \(9\%\) of the \(\$2.50\) price of each download. Her song is downloaded \(18\,400\) times. How much does she receive?
(i) Piecework pays for each item made or job done, not for time.
| \(145 \times \$3.20\) | \(=\) | \(\mathbf{\$464.00}\) |
(ii) A royalty is a percentage of the price of each item sold. Find it for one download first.
| \(9\% \text{ of } \$2.50\) | \(=\) | \(0.09 \times 2.50 = \$0.225\) |
| \(18\,400 \times \$0.225\) | \(=\) | \(\mathbf{\$4140.00}\) |
Keep the part of a cent in the royalty for one item; round only the final amount.
(i) the leave loading
(ii) his total holiday pay. (Use \(1\) year \(= 52\) weeks.)
Find the normal pay for the \(4\) weeks first. The loading is \(17.5\%\) of that.
| \(\text{weekly pay}\) | \(=\) | \(\$78\,520 \div 52 = \$1510\) |
| \(\text{4 weeks' pay}\) | \(=\) | \(4 \times \$1510 = \$6040\) |
| \(\text{(i) loading}\) | \(=\) | \(0.175 \times \$6040\) |
| \(\) | \(=\) | \(\mathbf{\$1057.00}\) |
| \(\text{(ii) holiday pay}\) | \(=\) | \(\$6040 + \$1057\) |
| \(\) | \(=\) | \(\mathbf{\$7097.00}\) |
In one step: \(6040 \times 1.175 = 7097\). Leave loading is paid only on the leave weeks, not on a whole year.
(i) For what weekly sales do the two plans pay the same?
(ii) One week Kirra, on plan B, is paid \(\$1194\). What were her sales?
(i) Plan B starts \(\$630\) behind (\(1050 - 420\)). The commission must make up that gap.
| \(0.045 \times \text{sales}\) | \(=\) | \(630\) |
| \(\text{sales}\) | \(=\) | \(630 \div 0.045\) |
| \(\) | \(=\) | \(\mathbf{\$14\,000}\) |
Above \(\$14\,000\) a week plan B pays more; below it plan A pays more.
(ii) Take off the retainer to find the commission, then divide by the rate.
| \(\text{commission}\) | \(=\) | \(\$1194 - \$420 = \$774\) |
| \(\text{sales}\) | \(=\) | \(774 \div 0.045\) |
| \(\) | \(=\) | \(\mathbf{\$17\,200}\) |
Check: \(0.045 \times 17\,200 = 774\), and \(420 + 774 = 1194\).
Common pitfalls
Frequently asked questions
How do you calculate commission?
Change the commission rate to a decimal and multiply by the value of the sales. For example, \(3\%\) of \(\$8000\) is \(0.03 \times 8000 = \$240\).
What is leave loading in Australia?
Leave loading is an extra payment, usually \(17.5\%\) of normal pay, given to many workers when they take annual leave. It is paid on top of their normal pay for the weeks of leave.
What is the difference between commission and a retainer?
Commission depends on sales: the more you sell, the more you earn. A retainer is a fixed amount paid each week or month, even if nothing is sold. Many sales jobs pay both.
What is piecework?
Piecework is pay for each item made or job finished, such as each crate packed or each item sewn. Pay \(=\) number of items \(\times\) rate per item.
How do you find the commission rate?
Divide the commission by the sales and multiply by \(100\%\). If there is a retainer, subtract it from the total pay first to find the commission.