Commission

A compensation scheme that pays an employee a percentage of the sales or performance they generate.

Commission ties pay directly to output, which is why it dominates sales roles. It transfers some earnings risk from the employer to the employee.

Often confused with

Piece Rate Pay: Commission pays a share of the value sold; piece rate pays a fixed amount per unit produced, regardless of what the unit sells for.
Profit Sharing: Profit sharing pays out of the business's profit and depends on costs as well as sales; commission pays out of an individual's sales alone.

Taught in

4.1 Management and Leadership

See also

4.1.D.2