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Sales Dictionary

Commission

Definition

Compensation paid to a salesperson based on the revenue generated from their sales.

Deep Dive

Commission is a form of performance-based compensation paid to an employee, most commonly a salesperson, based on the revenue generated from their sales, the number of units sold, or the profitability of the deals they close. Unlike a fixed salary, commission directly ties an individual's earnings to their sales output, serving as a powerful financial incentive to motivate higher sales volumes and revenue targets. It's a variable component of a salesperson's total compensation package.

Examples & Use Cases

  • 1A real estate agent earning a 3% commission on the sale price of a home they successfully broker
  • 2A car salesperson receiving a flat fee plus a percentage of the profit margin for each vehicle sold
  • 3A software sales representative earning a 15% commission on the annual contract value of new deals they close.

Related Terms

Sales IncentiveQuotaPerformance BonusBase Salary

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