1. What is Commission?

Commission is a form of variable pay based on achieving specific sales or performance targets. It directly links employee earnings to their results, incentivizing higher performance.

2. Why is Commission Important in HR?

Commissions motivate employees, especially in sales roles, by rewarding effort and success, helping companies drive revenue growth.

3. Common Types of Commissions

• Percentage of sales revenue
  
• Tiered commission rates based on targets
  
• Flat fees per sale or transaction
  
• Residual commissions for ongoing client revenue
  

4. Example of Commission in Practice

A salesperson earns a 5% commission on all sales above their monthly quota, encouraging them to exceed targets.

5. Best Practices for Managing Commissions

• Clearly define commission structures and criteria
  
• Ensure transparency and timely payments
  
• Align commissions with business objectives
  
• Regularly review and adjust plans
  

6. Related HR Terms

• Incentive Pay
  
• Bonus
  
• Performance Management
  

7. FAQs About Commission

Q1. Are commissions taxable?
Yes, commissions are taxable income.

Q2. Can commissions be combined with a base salary?
Yes, often employees have a base salary plus commission.

Q3. How are commissions calculated?
Based on sales figures and agreed percentage or rates.

Q4. What happens if a sale is canceled?
Policies vary; commissions may be clawed back or adjusted.

Q5. Can commissions be used for non-sales roles?
Yes, to incentivize performance in various functions.