Commission
What Is a Commission?
A commission is a form of payment earned based on the sale of a product or service. Instead of receiving a fixed wage alone, individuals may earn additional income calculated as a percentage of the sales they generate.
Commissions are common in sales-oriented roles.
Why It Matters
Commission-based income can create strong incentives for performance. Individuals working in commission-based roles often have the opportunity to increase their earnings by generating more sales or closing more deals.
However, commission income can also vary depending on performance or market conditions.
How Commission Works
Commissions are typically calculated as a percentage of the value of a sale.
For example:
- a real estate agent may earn a percentage of a home sale
- a salesperson may earn a percentage of product sales
Some positions combine a base salary with commission.
Example
If a salesperson earns a 10% commission on a $5,000 sale, they receive $500 in commission income.
Commission vs Salary
- Commission income varies based on sales performance.
- Salary provides fixed, predictable compensation.
FAQs About Commissions
Are commissions considered active income?
Yes, they are earned through work or sales activity.
Do all sales jobs pay commission?
No, compensation structures vary by employer.
Can commissions be combined with salary?
Yes, many jobs offer both base pay and commission.
Related Terms
