Best Ways to Make Commission Payments to Affiliates and Influencers

With a current net worth of $37.3 billion and expected to reach $48 billion by 2027, affiliate marketing is a growing force in the digital marketing world. But the real power behind it stems from how commissions are paid.

Commission payments play a key role in how businesses reward results, whether you’re managing a thriving sales team or working with a growing network of influencers. Since these payments are tied directly to performance, they are crucial in driving revenue and attracting top-tier talent.

While finding the right partners is important, paying them accurately and on time with a clear commission structure is what will keep your program running smoothly and your relationships going strong. 

In this article, we’ll explain commission-based pay, review the most common types of commission plans, and share best practices for setting up payouts. We’ll also highlight how Tipalti helps businesses simplify high-volume, global commissions with built-in compliance and automation.

What are Commission Payments?

A commission payment is income made from a sale to a worker. There is no hourly rate, overtime pay, minimum wage, or additional remuneration. Some people earn a commission in addition to a base salary, while others choose to work solely on a straight commission. In both cases, how much they earn is directly related to their performance. 

When a commission is earned, the worker makes a portion of that sale in income. For example, if someone makes a $300 sale with a 15% commission, they would earn 

$45 from that transaction. 

There are various ways to determine an affiliate’s commission. Payouts can be based on:

• How much do they sell
• How often do they sell
• How well they perform

This helps to drive affiliates to sell more products/services and thus make more money.

Commission-based pay is advantageous to salespeople because it gives them more control over their total income, and doesn’t put a cap on how much income they can bring in.

Types of Commission Payments

Commission payments generally fall into two main categories. Understanding which model you’re working with will make it easier to decide on the right payment system.

Employee-based Commissions

These are part of a company’s payroll and can apply to the following situations:

• Sales reps earn a percentage of closed deals
• Recruiters who receive payments for successful hires
• Other internal teams tied to revenue or other performance targets

Since these commission payments are tied to an hourly rate or base salary, they fall under wage laws. These laws set the rules for how employees should be paid, such as minimum wage, overtime pay, or recordkeeping. 

HR and payroll systems will generally manage these payments, which must comply with employment regulations like the Fair Labor Standards Act (FLSA) that covers minimum wage and overtime payments. For unique state requirements, state labor department websites have tools to look up wage laws and other relevant information.

Affiliate, Contractor, and Partner Commissions

These commissions are paid to non-employees, including:

• Influencers and creators promoting your product
• Content affiliates driving traffic or conversions
• Strategic partners or resellers are paid per lead or sale

Tipalti supports this second model. While it’s not a payroll system, it automates commission payouts to global contractors, affiliates, and partners. It handles currency conversion, tax compliance, and reporting all in one workflow, streamlining the payment process. 

For companies managing large-scale affiliate or contractor networks, Tipalti helps finance teams stay organized, accurate, and compliant with every payout.

What are Commission Payments in Affiliate Marketing?

In affiliate marketing programs, commission payments are the backbone of productivity. These payments keep your affiliates motivated and reward their performance. Every time an affiliate helps you make a sale, they should receive a payment based on a clear, agreed-upon structure. 

These payments typically go to influencers, content creators, bloggers, or other partners who promote your brand using an affiliate link or unique referral. They work to drive traffic, leads, or conversions.

When it comes to the different ways to pay an affiliate, here are the most popular commission structures:

• Revenue Share Model: The publisher gets a share of the revenue from sales that stem from the publisher’s site.
• Pay-per-action (PPA): The publisher receives payment after a visitor completes a specific action. Payment of commissions by the action includes:
• Pay-per-click (PPC) or Cost-per-click (CPC): Compensation is based on the number of clicks from a publisher’s site to the merchant’s website.
• Pay-per-acquisition (PPA): The payment rate is based on a specific action, such as when a new visitor signs up for a merchant’s newsletter or makes a purchase through an affiliate link.
• Cost-per-lead (CPL): Publishers receive payment for the contact information of a genuinely interested prospect. The merchant or sales team will contact the prospect.
• Pay-per-impression (PPI): Payment is based on the number of times a website visitor views the ad.

Percentage commissions are the most popular type of affiliate commission, with the average rate ranging between 5% and 30%. If you sell a variety of products/services, percentage commissions may motivate affiliates to promote items that lead to a higher average order value.

Common Commission Structures

There’s no one-size-fits-all when it comes to commission structures. The right structure for you depends on your team’s goals, your sales cycle, and your relationship with your partners or payees. Below is a breakdown of the most common commission models and how they work:

How Does Commission Pay Work in Affiliate Marketing?

Placing a value on referral marketing can get tricky, and setting the appropriate commission rate is a balancing act. If your rates are too low, it’s tough to attract quality partners. If they’re too high, you risk cutting into your margins.

A well-thought-out rate gives you room to grow while keeping affiliates motivated to promote your products or services. It’s all about finding a middle ground that benefits both sides.

Understanding the perfect affiliate commission conditions and setting the right rate takes work. Here are a few steps to follow to set a competitive, yet sustainable, commission amount that works for everyone:

1) Choose The Type of Commission Payment 

Start by choosing the type of payment you’ll offer. Affiliates usually want a cash payment, but store credit and other forms of payment can sometimes work.

Then, determine how you’ll calculate the commission amount. Will you award affiliates with a percentage of total sales, or will you give them a fixed dollar amount per conversion?

• Percentage commissions work well if your product catalog varies in price. Affiliates are more likely to push high-value items that boost their earnings.
  
• Flat-rate commissions make more sense if your pricing is consistent and you want to keep payouts predictable.

Whichever route you take, be sure the payment model aligns with your sales goals and profit margins.

2) Calculate the Average Customer Lifetime Value

What you can afford to pay affiliates depends on your profit margins. However, these can be difficult to determine and prone to fluctuation depending on what you sell. To simplify everything, calculate the average customer lifetime value (CLV) to guide you.

A CLV equates to how much money the average customer brings you throughout their time doing business (minus the cost of acquiring that customer). The longer somebody sticks around, the higher the CLV becomes.

A deeper understanding of the average customer lifetime value will help a brand determine a commission rate that is both affordable and sustainable.

CLV Equation

To calculate the average customer lifetime value, answer these questions:

• How much does it cost to bring in a new customer on average?
• What percentage of customers do you keep/retain each year?
• How much revenue does each customer bring in?

Average CLV = (Average annual profit earned from a customer (x) Average # of years someone has been a customer) – Initial cost of customer acquisition per customer

In order for your affiliate commission to be sustainable, it must be well below your average CLV. If it’s equal, you only break even, and that’s not the reason why you’re starting an affiliate program.

3) Analyze Competitor Commission Rates

Look at brands that attract a similar audience to yours, as they are typically competing for the same affiliates as you. Find at least 2 companies that are direct competitors with established affiliate programs. Analyze the commission rates of each program, offer structure, and online real estate. 

Every business vertical has a standard set of commission earnings. The average price of each product line and/or service helps to determine the actual payouts.

Look at how each competitor structures its affiliate commissions. Ask questions like:

• Are they paid in cash or credit toward products?
• What triggers a payout? Is it a sale, a generated lead, or something else?
• Are the commissions a percentage of the sale or a set amount?
• Do they offer bonuses for top performers?
• Are there tiered affiliate commissions (higher rates for top performers)?

These insights will help you to structure your own program so that commissions are competitive enough to attract top affiliates.

4) Start Low

Pinpoint a range of commission rates based on your competitive analysis, and start on the lower end. This will give your business room to increase commission rates later on. 

No one will be upset if you boost their pay later on down the road, but if you decrease it, people will be, and word will likely get around. Thus, it’s better to start off slow and work your way up to competitive commission rates.

Starting low gives you the freedom to test new strategies like tiered affiliate commissions or bonuses for top performers. Since a lower commission rate means higher profits, you’ll have more room to explore promotions and other rewards for your best affiliates.

5) Decide on Bonuses

Bonuses are a great way to recognize high-performing affiliates and keep them engaged. However, not every small business can afford to structure payouts with a bonus. There are a few different ways to apply bonuses. You can offer:

• Lifetime revenue goals: Reward affiliates that hit a specific sales goal or rank in your top percentage of earners with gifts
• Bonus streaks: When an affiliate reaches a given amount during a workweek or pay period, they unlock a limited-time higher rate
• Tiered commission plans: Certain amounts of lifetime sales by an affiliate will unlock a higher commission rate.
• Recurring commissions: For subscription-based services, the affiliate receives a payment each time the customer renews.

6) Set Clear Affiliate Conditions

Your commission rate is just one part of the equation. You also need to establish conditions or sales goals that affiliates must meet to be paid. Usually, a company only pays a commission check when a sale is made through an affiliate link. 

For example, if a customer returns a product or cancels a service within a set time frame, the affiliate typically forfeits the payout. This keeps your commission plan low-risk and tied to real revenue, but it can also discourage top affiliates who are used to more flexible models.

This is particularly the case if you have a longer sales cycle. In this instance, paying affiliates for both sales and leads may work out better for you. This helps to keep freelancers motivated as potential buyers research your product/service.

If you decide to reward affiliates for leads, make sure they are all qualified. They must fill out a form and give you their contact information after clicking an affiliate link. Set a smaller, fixed commission for the lead, and a larger rate for completed purchases.

Avoid rewarding affiliates solely for clicks or impressions, as this can increase the risk of fraudulent activity. Unethical contractors can easily take advantage of this type of commission structure, using various affiliate fraud techniques that you might be unaware of.

7) Set up a Tracking System 

Your tracking system is one of the most important pieces of your commission plan. How long will affiliates be eligible for a payout after someone clicks their link? Will they only earn a commission if a purchase is made that same day, or is there a longer window of time?

If your sales cycle is longer or research-heavy, affiliate tracking links or cookies are essential. These cookies allow you to credit affiliates for sales that don’t happen immediately but still came from their referral.

The cookie life should align with your typical buyer journey. Anything more and you lose revenue, and anything less and you lose talented affiliates.

8) Periodically Check and Adjust 

The rate you pay affiliates should never remain fixed for too long. You need to continuously check in and adjust according to market fluctuations. It may be that your competitors have raised rates, in which case, you could lose top talent for not adapting.

Changes don’t have to be permanent, either. An easy way to adjust is to identify a period of time when you can add a bonus structure, which could potentially increase sales. It’s a great way to drive more productivity during months of low activity.

Pros and Cons of Commission-Based Pay

While commission-based pay can drive sales and help manage costs, it also introduces challenges around tracking, compliance, and income stability. Whether you’re building a commission plan for employees, affiliates, or contractors, you’ll need to weigh the pros and cons before rolling it out. Here’s a breakdown of what to consider: 

Pros

• Boost performance and accountability: Commission-based pay gives affiliates and sales teams a clear sales goal and financial incentive to work towards. When pay is directly tied to results, motivation goes up. 
• Cost-effective for small businesses: Since there is no hourly rate or base salary requirement in some models, this form of payment can help reduce overhead costs and stretch your budget.
• Attracts top-tier talent: A well-paid commission structure will attract skilled, high-performing salespeople who are confident in their abilities to generate revenue. 
• Customizable commission structure options: Businesses can tailor payments by role, such as residual commission for long-term partners or tiered plans for top performers.

Cons

• Tracking commission pay can be complex: Tracking sales and calculating accurate commissions based on sales volume or the pay period can be a time-consuming process.
• Potential compliance issues: Income tax, overtime pay eligibility, and other legal requirements may still apply in some cases. Payouts need to be tracked and reported correctly, and failing to do so can result in legal penalties.
• Creates variable income for workers: The lack of a stable income for workers could result in discouragement, leading to disputes or a dip in performance. 
• Not ideal for every team: While commission pay can motivate salespeople, it may not be ideal for roles that require more stable pay or are driven by collaboration instead of direct sales.

Commission Payment Processing

Because affiliate marketing has a cross-functional workflow, it makes commission payments a complex process. Paper checks, printing forms, manual income tax, and other time-consuming tasks are not complementary to a salary based on residual commission.

Leveraging technology like automation and self-service portals helps a brand streamline the complex processes of issuing accurate commission payments to a growing affiliate network.

For example, the IRS requires that a business validate the tax ID of all payees, both domestic and international. This makes tax compliance a daunting task when paying multiple affiliates, especially on a global scale. A mass payment platform like Tipalti can automatically verify the identification and country-specific tax requirements of a payee through global databases.

Affiliate commission payments are more than just a dollar amount. A successful affiliate marketing program uses streamlined processes to build and maintain publisher relationships. 

A mass payment platform empowers managers to take on challenging aspects of affiliate marketing, such as onboarding a diverse group of publishers, growing a global affiliate program, and complying with tax regulations. It ultimately empowers companies to better focus on building powerful relationships with publishers, freelancers, affiliates, and influencers.

Should You Automate Commission Payments?

Affiliate and influencer solutions like affiliate marketing platforms enable managers to track the performance of a variety of affiliate marketing campaigns. However, managing ad performance on a platform that’s separate from your mass payment provider creates a lengthy and cumbersome workflow.

That’s why a business needs a global platform with integration capabilities. 

Significantly reduce workload by tracking ad performance and issuing payments in a single solution. There are a multitude of benefits to automating commission payments with affiliate software, including:

• Paying affiliates on time improves morale and boosts retention
• Automation helps manage expenses better
• Eliminates the redundant use of paper forms
• Saves time with more accurate reporting
• Cultivates a workforce that’s proactive and motivated

How to Show Publisher Loyalty to Affiliates

Once you get your hands on an affiliate that meshes well with your brand, it’s important to make an effort to keep them. Competition can be fierce for this top talent, so make sure you are always doing something to show appreciation to these productive people. Here are a few ideas:

Offer Exclusive Deals

If all of your affiliates use the same offers for their audiences, creating exclusive deals for an affiliate goes a long way. Something that is tailor-made for their viewership, with specific bonus content. This can include things like:

• A limited version of a product/service
• Unavailable bundle pack
• Tailored content

Give them something unique to offer, and the experience will be memorable for all parties involved.

Repository of Content

Give your affiliates access to high-quality promotional materials, so they don’t have to spend time recreating the wheel. This includes items like:

• Banners
• Landing pages
• Branded graphics
• Video content

This will speed up their work tremendously, as they can choose from a repository of pre-approved materials instead of researching or developing their own. 

You may also want to consider providing landing pages and other content specifically tailored to a particular affiliate if they draw in enough sales.

Free Merch

Giving affiliates company-branded merchandise and free products shows that you see them as an essential part of your business and team. It may not seem like much to give someone a t-shirt or coffee cup, but it might not be something any of your competitors are doing.

Sure, cash speaks loudest, but you never know when a cool t-shirt will also be appreciated. If your affiliate films video content, this is even better, as they can display it during their messaging. Creating opportunities for affiliates to promote your business and make money is a quick and easy way to foster brand loyalty.

Access to Tools

Whether your affiliates are bloggers, influencers, or artists, they all require programs to keep the train on the track. Make it easier for them to work and get things done by offering access to a variety of platforms and tools that create efficiency. 

For example, if you have someone working as a social media manager, gift them with a subscription to a scheduling tool. If it’s a graphic artist, sign them up for a design program.

Simple Recognition

Praising affiliates for reaching a milestone goes a long way to boosting their confidence and motivating them. If someone is doing a good job, tell them! Besides thanking affiliates, consider featuring them in a newsletter or mentioning them on social profiles. Go the extra step to show people you appreciate them.

Add some gamification to your sales goals. Give affiliates the opportunity to earn badges and titles, and compete amongst each other. It’s an excellent way to inspire people to work harder and boost productivity.

Additional ways to show loyalty include:

• Make payments on time, every time
• Provide new opportunities around every corner
• Keep lines of communication open at all times
• Be open to negotiation

Make Commission Payments Work for You with Tipalti 

How your business handles commission payments directly affects the way affiliates and partners view your brand. If payouts are unclear, delayed, or difficult to track, your best talent might start to look elsewhere. On the other hand, if your payments are reliable and have a strong commission structure, this becomes a powerful tool for growth and retention. 

Affiliate software platforms that integrate robust mass payments capabilities, like Tipalti, offer a powerful foundation for streamlining your program, ensuring fast, accurate, and compliant payouts to every partner worldwide.

Ready to revamp your affiliate program? Get the full breakdown in the Winning Digital Partners With Global Payments eBook.