How does draw on commission work?

Every company does "draw" a bit differently. Some companies (notably in the construction industry) use the term "draw" when they don't even know what it is.

As the others stated, it is basically an advance on commissions earned. Whatever draw you are paid is deducted from commissions at some point in the future, with the ultimate goal being that your commissions will exceed the draw.

What you need to know is whether it is a "recoverable" draw- which means the employer can hold you accountable for the draw if you leave the position before your commissions exceed the draw. This, you will have to ask the employer before you agree to it. However, most draws are not recoverable, as most courts will not enforce them if it comes down to that.

They know that you won't be making any money for the first 30-120 days. Even if you sell something tomorrow, you might not get paid your commission until the buyer performs ( gets a loan; receives the product; doesn't cancel his credit card purchase, etc). The company knows that you need money to live or you will quit for a regular salary job. They give you a set amount (maybe $600) each month so you can pay for gas to get to work. If you earn $1,000 that month, you will get $400 on payday. If you earn zero, you'll still get your $600 next month.

To make sure that you won't "owe" them any money, pick up a pen and write on your employment contract that the draw will be reimbursed out of commissions but you are not responsible to pay it back if you don't make the required commissions. usually you don't owe them the draw if you are not successful.

Make sure you check into the components of the draw. While some work like base + Commission, SOME draws are against future commissions. Which means if you don't make the sales goals and draw the salary, the amount your drew is subtracted from future commissions. That's a big deal

Your employer "fronts" you a certain amount of cash in a draw account...it's basically a no-interest loan...the expectation is that you will pay it back out of the commission you earn from all the sales you will make...they are doing you a "favor" by loaning you something to live on until you start earning them the "big bucks" by moving lots of product!

Happy selling!

Basically, they will pay you the agreed upon draw amount. As you earn commissions these commissions will first be used to pay back the draw. If you don't earn enough commissions then you will owe the company that money. Depending upon the agreement you may or may not get another draw until you earn enough commissions.