Commission Plans Defined (Back Office)

This article outlines various commission automation options in Back Office.

Commission plans are entered based on what your office needs to charge each Agent towards their commissions earned.  Every brokerage knows what they need to earn per Agent to be profitable however, how brokerages charge for fees varies greatly brokerage to brokerage. Some options of popular commission plans include:

Closed – considers the Agent’s commission level and calculates the commission accordingly based on the closing date; from the anniversary start date to the transaction’s closing date.

Note: Commission amounts are recalculated at the time the transaction status has changed from open to closed. If the commission plan type includes open transactions, these will calculate the amount based on the Agents’ anniversary start and end dates as they relate to the effective date of the transaction.

Firm – calculates the commission according to the Agents’ commission level based on the firm date of the transaction (firm date is equivalent to conditional date); from the anniversary start date to the transaction’s firm date. If you have more than one transaction with the same firm date, the program will use the transaction number as the secondary field to sequentially calculate the agents earned commission for plans that are based on different levels.

Transaction – calculates the commission according to the Agent’s commission level based on the effective date of the transaction (the date the transaction was entered); from the anniversary start date to the transaction’s effective date.  If you have more than one transaction with the same effective date, the program will use the transaction number as the secondary field to sequentially calculate the agents earned commission for plans that are based on different levels.

Year Written –  calculates the commission according to the Agent’’s commission level based on the effective date; from the anniversary start date to the anniversary end date.

Additional commission plans (attractive to recruit and retain top performing agents):

Rolling 12 + 1 Month Closedcalculates the commission according to the Agent’s commission level based on the closed date; within a plan period that starts and counts all closed deals in the 12 months prior to the closing date of the transaction and will exclude any and all transactions closed in existing month

Rolling 12 Month Closed – calculates the commission according to the Agent’s commission level based on the closed date; within a plan period that starts and counts all closed deals 12 months prior to the closing date of the transaction.

Rolling 12 Month Written – calculates the commission according to the Agent’s commission level based on the effective date; within a plan period that starts and counts all written deals 12 months prior to the written date of the transaction.

Today (Closed) – calculates the Agent’s commission from the anniversary start date to today (the day you are processing the closing).  The commission logic for ‘Today’ is exactly same as type ‘Closed’, except the history date range for ‘Today’ is anniversary starting date to Today’s day,  the history for type ‘Closed’ is from Anniversary starting date to current Transaction’s closed date.

Commission Basis

The commission basis is a key factor in determines how commissions are to be calculated based. The most popular options are off the Gross Commission Income (GCI), the Adjusted Gross, the Agent portion, or the Company dollar (Broker portion).

Additional Parameters 

AND/OR – By selecting “AND”, the program will base commission calculations on the criteria entered.  For example, if the commission plan was 70/30 to 80,000 and 6 ends, once the Agent received 80,000 in gross commissioned sales and closed 6 ends, the system would automatically start calculations based on the next level of the commission plan.  By selecting “O”, the commission plan would use either the history or the number of ends.  For example, if you had a commission plan of 70/30 to 80,000 and 6 ends, the Agent would have to receive 80,000 in commissioned sales or have done 6 ends to move to the next level of the commission plan.

End – Commission plans can be based on ends as well as gross dollars.  This field is used the same way as the ‘Up to $’ field.  You can enter the number of ends the Agent must close before moving to the next level of the plan. In the End field, if applicable, enter the maximum number of ends that the Agent must sell before moving to the next level of the commission plan, otherwise, leave this field as ‘999.00’ If the plan is based on a 11.5 end calculation, you may enter it now.

Commission Plan: Flat Fee 

Below is an example of a reducing Flat Fee Plan whereby the brokerage will receive $700.00 for each of the first ten transactions the agent closes. Once ten transactions have been closed, the amount reduces to $300.00 for all subsequent transactions for the agents current contract year. This plan is based on Closed commissions.

Commission Plan: Tiered/Multi Level

In this sample, the agent will receive 70% of the gross commission and the brokerage receives 30% to a maximum of $50,000.00. At 50,000.00 the rate automatically changes from 70/30 to 80/20 whereby the agent will receive 80% of the commission and the brokerage will receive 20% to a maximum of 100,000.00. Anything over 100,00.00 is then paid out at 90% to the agent and 10% to the brokerage. This plan is based on Closed commissions.

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