Non-Recoverable Draw

Recoverable vs. Non-Recoverable Draw

A draw against commission is a common element of many commission-based compensation plans where reps can borrow from their future commission earnings to maintain a more stable income. There are two types of draws, recoverable and non-recoverable draws.

These payments provide sales reps with the money they need to cover living expenses during seasonal lows, ramp periods, or other times when it’s not easy to earn a living off of commission alone.

Under a recoverable draw, once the rep starts earning commission again, they repay the draw amount from the money they make in commission. When a salesperson earns more commission than the draw amount, they typically receive the draw amount plus any money left over after their draw balance is paid off.

A non-recoverable draw is different from a recoverable draw in that under non-recoverable draws, the borrowed amount does not need to be repaid in the next pay period and is not carried over. This is unlike a recoverable draw which is carried over and accrued as debt and then taken out of future paychecks. You can think of a non-recoverable draw as a guaranteed minimum commission payment.

Example of a Non-Recoverable Draw

In this example of a non-recoverable draw, let’s pretend this is the pay for a brand new sales rep. The company has instituted up to a $2,000 non-recoverable draw for the first six months of an Account Executive’s tenure. This is to make sure the rep earns a fair wage while they’re still getting the lay of the land.