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Non-Recoverable Draw: The Sales Rep’s Safety Net

A business manager handing over cash representing a non-recoverable draw to a sales rep
A non-recoverable draw is a supplemental payment to help sales reps when their commission earnings are low. [Salesforce]

Learn how a non-recoverable draw provides financial stability for your sales employees.

Many sales reps rely on commission to make a decent living. So when they’re unable to close enough deals to generate healthy commission earnings, they’re at risk of not making enough money to support themselves. But there are ways that companies can support sales reps during times when their commission is low – including a non-recoverable draw.

In this article, we’ll define this term and explain how it can provide a baseline of financial security to sales reps.

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What is a non-recoverable draw?

A non-recoverable draw is a guaranteed minimum payment – separate from base salary and dependent on how much commission they earn – that a sales rep receives in a specific pay period. They do not need to pay this back to the organization. Many sales commission plans include non-recoverable draws as part of their variable compensation offerings.

If a sales representative makes less in commission than the draw amount, they will be paid the difference. That amount will not be held against the rep as debt in future pay periods. If the rep earns more than the non-recoverable draw amount, the draw does not apply to them and the rep will simply be paid the full commission amount they earned.

Here’s a quick example: Let’s say a sales rep’s plan includes a $2,500 per month non-recoverable draw. In January, they earn $500 in commission. They would receive a draw amount of $2,000 to meet that minimum $2,500 threshold. (A more in-depth example is included below.)

The intention of a non-recoverable draw is to provide a livable wage for all reps during times when it’s not possible or more difficult to earn commission. This includes ramp periods, seasonal lows, and market changes.

Non-recoverable vs recoverable draw

There are two types of draws against commission, recoverable and non-recoverable draws.

Under a recoverable draw, once the rep starts earning commission, they repay the draw amount from the money they make in commission. In this sense, a recoverable draw is like a loan from the business to the salesperson.

A non-recoverable draw is different from a recoverable draw because the borrowed amount does not need to be repaid in the next pay period and is not carried over.

Example of a non-recoverable draw

Let’s pretend a company is paying a brand-new sales rep. The company has instituted up to a $2,000 non-recoverable draw for the first six months of their tenure. This is to make sure the rep, whose base salary is not very high, earns a fair wage while they’re still getting the lay of the land.

Pay PeriodCommission EarnedDraw AmountTotal Variable Pay
Jan. 2024$600.00$1,400.00$2,000.00
Feb. 2024$1,200.00$800.00$2,000.00
March 2024$800.00$1,200.00$2,000.00
April 2024$1,400.00$600.00$2,000.00
May 2024$2,000.00$0.00$2,000.00
June 2024$2,300.00$0.00$2,300.00
This table demonstrates the draw amount and total variable compensation the sales rep receives, based on their commission earnings during the first six months of their employment.

Use non-recoverable draws to guarantee financial stability

Companies that offer a non-recoverable draw as part of their incentive compensation management strategy are protecting their sales reps against the inherently volatile nature of sales commission. Sure, sales reps may still have to close many deals in order to take home a lot of money, but this guaranteed minimum payment assures them that even during fallow periods, they’ll earn enough money to remain financially stable.

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Paul Bookstaber Writer, Salesblazer

Paul Bookstaber is a writer at Salesforce. He has a decade of experience in content marketing in B2B tech. Before that, he published a magazine and ran a tabloid blog. Today, he splits his time between Florida and the Mountain West, and loves to hike, ski, and watch Bravo. He is in a polyamorous relationship with Luke and Roger, who are cats.

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