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How does a draw against commissions work?

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Catwoman posted 2/25/2014 18:19 PM

I am sure that there are several ways a draw against commissions works.

Does the money received in the draw then get debited against commissions earned until the "draw" is "repaid". If this is the case, it stands to reson that one gets paid the draw and then until the draw is repaid, does not receive commissions?

I am very interested to know the ways in which this might work.

Thanks.

Cat

Whalers11 posted 2/25/2014 18:24 PM

Does the money received in the draw then get debited against commissions earned until the "draw" is "repaid". If this is the case, it stands to reson that one gets paid the draw and then until the draw is repaid, does not receive commissions?

This is how I have usually seen draws work.

It's basically an advance on future commissions.

ETA: I know of one company that pays a monthly draw. Let's say the draw is $10,000. If your commissions are $11,000, you will get an additional $1,000 on top of the draw. If your commissions for that month are $9,000, you get to keep your draw, and the "debit" does not carry over to the next month. So you are guaranteed your draw for the month. I am not sure if that is a common method of doing it, though, because then to me that just sounds like a base salary?

[This message edited by Whalers11 at 6:28 PM, February 25th (Tuesday)]

Catwoman posted 2/25/2014 18:27 PM

So it basically only adjusts the "timing" of the payment--with a draw, you get more initially to get you started and your future earnings are supposed to pay that back.

That is what I thought. This should be interesting--the ex is claiming that the draw against commissions is not technically commission, so he shouldn't have to pay alimony on it.

Cat

Whalers11 posted 2/25/2014 18:30 PM

Cat, look at my edit where I added an example. Maybe that is what your ex is trying to argue?

Catwoman posted 2/25/2014 18:43 PM

No, the ex gets a salary, also. The draw is against, I believe, future commissions. He is trying to say that he doesn't have to pay alimony on it because it is a draw, I am saying it is commission because it is merely an advance on future commissions. If he gets paid a draw for say 6 months and then he goes the next six months earning no commission, he doesn't owe me alimony during the months he didn't earn commissions while he was paying back his draw. Therefore, what he is trying to do is keep from paying alimony on the draw (and, of course, report to the IRS that he is paying alimony on it. But that is another story).

Cat

Whalers11 posted 2/25/2014 18:53 PM

Well then... I would say, yes, conventional use of a "draw" is that it is an advance on future commissions. And that if you are entitled to alimony based on his commissions, that would include the amount he earns as a draw.

I hope someone else pipes up and can give you some more confirmation on that.

LoveActually posted 2/26/2014 12:00 PM

You really need to clarify with the employer if the draw has to be repaid. My husband received a 12 month draw in addition to his commission percentage as part of his hire package. They used the word "draw" in the actual employment contract, but it was a temporary draw that did not have to be repaid ever.

gonnabe2016 posted 2/27/2014 23:04 PM

Your ex is such an ass.


it stands to reason that one gets paid the draw and then until the draw is repaid, does not receive commissions?

If he gets paid a draw for say 6 months and then he goes the next six months earning no commission

Uh-uh. He is still *earning* commission during that time period.....it is just being off-set by the amount that he was advanced, kwim?

You are definitely entitled to *your cut* of his commissions. The only question is probably going to be whether you will get your cut out of the *draw* amount taken (because it could be *argued* that the draw is a loan) or on his *true* commissions earned each month. Is it standard practice in his industry for 6 month draw's to occur? (That seems really risky for the employer to do, imo.)

Your perception of this is spot-on -- it is a matter of timing, but the bottom line is that it *is* commission-based. He's trying to mindfuck you.

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