Finance and Bookkeeping
Commission Tracking for roofing contractors
Commission disputes are almost never arithmetic. They are about what counted, when it counted, and against what — questions the plan was silent on until somebody needed an answer.
What gets produced each period
A calculation applying the written plan, with the gaps in that plan surfaced as questions for you rather than resolved quietly by whoever ran the numbers.
A statement per person that shows the jobs, not just the total — what each was treated as, what adjustments were applied, and why. Detail is not generosity here; it is the thing that stops the recipient reconstructing the figure from memory.
And a record of every judgement made where the plan was ambiguous, so the same situation is handled the same way next time instead of being decided afresh by whoever happens to be looking.
The inputs are agreements, not measurements
Most calculations a back office performs take facts and produce a number. A quantity, a rate, a total. Commission is different in a way that explains nearly all the friction around it: its inputs are not facts but agreements, and agreements can be understood differently by two people acting in complete good faith.
Consider what a roofing commission actually depends on. Whether the trigger is a signed contract, a started job or collected money. Whether the base is the contract value, the value net of material, or the margin. Whether a supplement counts and at what rate. What happens when a customer cancels after a payment has been made. How a job is treated when one person sold it and another rescued it. Every one of those is a definition somebody chose, and if nobody wrote it down then the definition in force is whichever one gets asserted first.
Roofing intensifies this because so much of the revenue is contingent and arrives late. A job’s final value frequently is not the value at signing — supplements change it, scope changes change it, and insurance- funded work can settle at a different number months afterwards. A plan that did not anticipate a moving base will produce a disagreement the first time the base moves, which will be soon.
So the useful work is definitional rather than computational: find the questions the plan does not answer, get them answered by the person entitled to answer them, write the answers down, and then apply them the same way every period without exception.
A commission is a defined component
It is tempting to treat a commission as a discretionary extra sitting outside ordinary pay. Federal wage rules do not treat it that way. 29 CFR 778.117 — Commission payments in general states that “Commissions (whether based on a percentage of total sales or of sales in excess of a specified amount, or on some other formula) are payments for hours worked and must be included in the regular rate.”
Two things in that sentence are worth noticing. The parenthesis is deliberately broad — it does not matter which formula a company invents, the treatment attaches anyway. And the operative words are payments for hours worked, which places a commission inside compensation rather than beside it.
The consequence for this desk is about records rather than conclusions. How a commission is defined and when it is treated as earned are facts that need to be recorded accurately, because things downstream depend on them. What those consequences are for any particular arrangement is a question for your licensed adviser, and it is not one answered here.
This describes a federal wage rule in general terms. It is not legal, tax or accounting advice, it makes no determination about your plan, your staff or your obligations, and circumstances differ. Those questions belong with your own licensed adviser; the department page below sets out where this work stops.
Where the numbers come from
Commission depends on the desks that establish job values, and sits inside Finance and Bookkeeping, which carries the department boundary.
Questions about paying salespeople
Our commission arguments are never about the maths. Why is that?
Because the maths is the easy part and it is downstream of everything contentious. The disagreements are about definitions — whether a job counts when signed or when collected, whether a supplement counts, what happens when two people touched the same customer, whether a cancellation reverses. None of those are calculation errors. They are questions the plan did not answer, discovered at the point somebody wanted a different answer.
Do you write our commission plan?
No. What the plan should say is a commercial decision about incentives and it belongs to you. What we do is read it, list the questions it does not currently answer, and apply whatever you decide consistently. Most plans we see are perfectly reasonable and silent on three or four situations that then arise every season.
What can salespeople actually see?
Whatever you decide, and the recommendation is more rather than less. A statement that shows only a total invites the recipient to reconstruct it, usually inaccurately and usually in a way that favours them — not dishonestly, but because they remember the jobs they worked on and not the adjustments. A statement that lists the jobs and how each was treated ends most disputes before they are raised.
How do you handle a deal two people worked on?
By having a rule that existed before the deal did. Split arrangements are where plans are most often silent and most often argued about, and the only version that survives is one written down in advance and applied without exception. Deciding a split after the fact is a negotiation between colleagues, which is a bad position to put either of them in.
What about jobs that get cancelled after we have paid?
That is the second most common gap. Whether a paid commission reverses, is offset against a future period, or stands is a policy question with reasonable answers on both sides. What matters is that the answer exists before the situation arises, because deciding it afterwards will always look like it was decided to suit the company.
Does any of this affect payroll?
It can, and the section below cites a federal rule on how commissions are treated in the regular rate. That is one of the reasons a commission is not a free-standing payment that can be handled informally — how it is defined has consequences past the cheque. What follows from that for your business is a question for your licensed adviser.
The wage rule cited above
- 29 CFR 778.117 — Commission payments in general — U.S. Office of the Federal Register (eCFR)
Find the three situations your plan is silent on
Send us the plan and the last statement. The gaps are usually visible in one read, and they are the same gaps every year.