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Payment and models

Commission

Also called affiliate commission, performance-based pay, provision, kommission.

Short answer

Commission is a payment calculated from a result – typically a percentage of a sale – rather than a fixed amount for time. In affiliate marketing, commission is what an affiliate earns when their link leads to a sale, a lead or another agreed action.

Definition of Commission.

Commission is the payment model at the heart of affiliate marketing: the store only pays once an agreed action has happened – a sale, a lead or a sign-up. There are 2 main forms: a percentage of the order value (RevShare, settled per sale as CPS) and a fixed amount per action (CPA or CPL). The rate and type are set in the program terms.

The calculation base is crucial: percentage commission is calculated on the order value excluding VAT, and usually also without shipping. VAT is not the store's revenue, so it is not part of the base. A rate of 10 % on an order of DKK 1,250 including Danish VAT (25 %) therefore gives DKK 100 – not DKK 125.

A commission is not money in the account the moment the sale happens. It is created as pending while the store checks the order for returns, fraud or rule breaches. Only when the sale is approved does the commission count as earned and become part of a payout. The life cycle – pending, approved or rejected, paid out – protects both parties.

The rate does not have to be flat. Tiered commission raises the rate with volume, recurring commission pays out on every subscription renewal, and a program can give different rates to different types of affiliate or product categories. What matters is that the structure is in the program terms before the traffic is sent.

How it is calculated

Commission = order value excl. VAT × commission rate

order value excl. VAT
the order amount without VAT – and usually without shipping
commission rate
the percentage the program offers, e.g. 10 %

Example

Order value incl. VAT
DKK 1,250
Order value excl. VAT
DKK 1,000
Commission rate
10 %
Commission
DKK 100

The commission is the affiliate's earnings on the order – calculated on the net amount, not on the amount the customer paid including VAT.

Who pays what

The store carries the total cost: the commission to the affiliate plus a network fee for the platform. An affiliate needs to look at 2 numbers to assess a program – the rate and the calculation base. A rate of 15 % on a low average order can be worth less than 5 % on a high one, so EPC is a better figure for comparison than the rate alone.

For the affiliate, commission is income that has to be booked. In Denmark, a VAT-registered affiliate invoices Danish commission with VAT, while commission from foreign counterparties may fall under the reverse charge mechanism. The calculation of the commission itself is based on the order value excluding VAT – the 2 VAT questions are independent of each other. Other countries have their own rules – check locally.

Commission vs. network fee

AspectCommissionNetwork fee
Goes tothe affiliate who generated the salethe network that runs tracking and payouts
Calculated onthe order value excluding VATthe store's total price – at Affilyflow, 20 % of it
Agreed inthe program termsthe network's pricing model

The key question is whether the fee is deducted from the affiliate's commission or added on top – at Affilyflow it is part of the store's total price and is not deducted, so the affiliate gets exactly the rate shown.

How it goes wrong

  • 01

    Calculating commission on the amount including VAT

    Your expectation ends up 25 % too high if the rate is applied to the amount the customer paid. The base is the order value excluding VAT – also check whether shipping and discounts are deducted before the rate is applied.

  • 02

    Counting pending as earned

    A pending commission can still disappear through a return or a rejection. Budget on approved commission, not on the number at the top of the dashboard the day after the sale.

  • 03

    Discount codes erode the base

    If a 20 % discount code is used, the order value – and with it the commission – falls accordingly. A campaign can therefore increase the number of sales and still lower the commission per order.

At Affilyflow

Commission in practice

At Affilyflow, the commission is locked at the moment of the click – the rate and type are copied to the click row, so a later rate change never affects clicks that have already been made. The affiliate gets exactly the rate the program shows: our fee is 20 % of the store's total price, and the affiliate gets the 80 %.

Commission is always created as pending and calculated excluding VAT – although via the Shopify app it is calculated on the value of the goods without shipping, where it is not yet confirmed whether VAT has been deducted. The store has the program's approval period (30–90 days) to reject with a reason the affiliate can read – after that, the sale is approved automatically.

Frequently asked questions

What does commission mean?

Commission is payment by result: a percentage of a sale or a fixed amount per agreed action. If an affiliate sells an item for DKK 1,000 excluding VAT in a program with 10 % commission, they earn DKK 100.

Is ‘provision’ the same as commission?

Yes – there is no difference. In Danish, provision is the everyday word for commission, and kommission is a direct borrowing from the English commission. Both cover the payment an affiliate earns for generating sales, leads or other agreed actions for a store.

How is affiliate commission calculated?

Percentage commission is calculated as the order value excluding VAT multiplied by the program's rate – 10 % of DKK 1,000 net gives DKK 100. Fixed commissions are triggered as a set amount per action, for example DKK 50 per lead. The base and rate are in the program terms.

When is my commission paid out?

Commission is first created as pending. At Affilyflow, the store has the program's approval period (30–90 days) to reject with a reason – after that, the sale is approved automatically. Approved commission is paid out automatically on the first banking day of the month when the balance is at least DKK 100, or when you press ‘Udbetal nu’ (Pay out now).

Is affiliate commission with or without VAT?

The commission is calculated on the order value excluding VAT. The commission itself is income for the affiliate: in Denmark, if you are VAT-registered you add VAT to the invoice for Danish counterparties, while commission from foreign counterparties may fall under the reverse charge mechanism.

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