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