Commission

What is Commission?

Commission is a financial incentive or fee paid by an employer to an employee, typically in the form of a percentage of sales or revenue generated. It is often used to motivate employees to achieve specific goals or close deals, such as selling goods or services or securing new business for the company. The commission is usually paid in addition to the employee’s base salary.

Key Features of Commission:

  • Percentage-Based: The commission is often a percentage of the total sales or revenue brought in by the employee. The percentage rate is determined by company policies.

  • Performance-Based: Commission is typically tied to performance, with employees earning more when they close deals or meet sales targets.

  • Incentive for Growth: Commissions serve as an incentive for employees to maximize their productivity and bring in more business for the company.

Types of Commission:

  • Sales Commission: The most common type, paid to salespeople for selling products or services. This can be structured in several ways, such as a flat percentage of each sale or tiered rates based on performance.

  • Incentives and Bonuses: Often, commissions can be coupled with performance incentives or bonuses for achieving or exceeding sales targets.

  • Referral Commission: Some companies offer commissions for referring new customers, partners, or clients.

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