A draw gives a rep a predictable payment while their commissions catch up. It's common for new hires who haven't built a pipeline yet, and for commission-only roles where income can swing a lot from month to month.
How a draw works
Each period, the rep receives the draw amount. At the end of the period, their actual commission is compared to it:
- If commission is higher than the draw, the rep gets the difference.
- If commission is lower, what happens depends on the type of draw.
Recoverable vs non-recoverable
- Recoverable draw: the shortfall is carried forward and subtracted from future commissions. It's an advance.
- Non-recoverable draw: the shortfall is forgiven. It works like a guaranteed minimum for that period.
Example
A new rep has a recoverable draw of $3,000 a month.
| Month | Commission earned | Paid | Carried forward |
|---|---|---|---|
| 1 | $1,000 | $3,000 | -$2,000 |
| 2 | $2,500 | $3,000 | -$2,500 |
| 3 | $7,000 | $4,500 | $0 |
In month 3, the rep earned $7,000. The $2,500 carried forward is recovered first, so the payout is $4,500.
With a non-recoverable draw, month 3 would pay the full $7,000.
Mistakes to watch for
- Unclear terms. Spell out the type of draw, how long it lasts, and what happens to any balance if the rep leaves.
- A balance that never clears. If a rep is always behind, the draw hides a ramp or territory problem.
- Forgetting to end it. Draws for new hires should have an end date, after which normal commission takes over.
FAQ
Does a rep have to repay a draw if they leave?
It depends on the agreement and local law. Many companies don't pursue an unpaid recoverable balance after someone leaves, but it should be written down either way.
Is a draw the same as a base salary?
No. A base salary is earned regardless of results. A recoverable draw is an advance on future commission. A non-recoverable draw is closer to a guaranteed minimum, but only for the period it covers.
How long should a draw last?
Typically through the rep's ramp-up period, often the first few months, until their pipeline produces steady commission.