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When a sales representative enters a new sales role, either in a new company or in the current company, it is a common practice to pay a non-recoverable draw (also known as a guarantee) for a number of months. A guarantee is a compensation payment made in addition to base salary that is paid regardless of performance.
The draw against commission is a “guarantee,” paid with every sales paycheck. Generally, companies implement a draw against commission to ensure pay during times of sales uncertainty (e.g., decreased cash flow due to inexperience within a particular territory or product as they ramp up).
A draw against commission system can greatly benefit your sales staff. The purpose of a draw on commission is for employees to receive regular, guaranteed income, which can improve their personal finances. A sales commission draw is especially helpful to sales representatives who are still learning their jobs.
Draw against commission is a salary plan based completely on an employee's earned commissions. An employee is advanced a set amount of money as a paycheck at the start of a pay period. At the end of the pay period or sales period, depending on the agreement, the draw is deducted from the employee's commission.
Employees who received a draw were required to repay it, by deducting the amount of the outstanding draw from the next paycheck. Gregg's policy provided that upon termination of employment, “the employee will immediately pay the company any unpaid deficit amounts.”
A recoverable draw (also known as a draw against commission) is a set amount of money paid to the sales representative by the company at regular intervals. When the commissions are earned, the salesperson pays back the draw.
A recoverable draw is a payout that you expect to gain back. You are basically loaning employees money that you expect them to pay back by earning sales commissions. If the employee doesn't earn enough commissions to cover the draws after a certain time, you might need a debt payback plan.
The employer cannot recover the money from a future commission, so the only way to recover the draw is to demand the employee return the money already paid an unlawful kickback. Based on that principle, the panel held that the repayment-upon-termination policy was unlawful.

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