According to the U.S. Department of Labor, “a sales commission is a sum of money paid to an employee upon completion of a task, usually selling a certain amount of goods or services.” Commission pay is common in the sales profession, and in industries ranging from real estate to insurance. Commissions are often paid as a percentage of the amount of a sale. In a simple example, if a real estate agent sells a $100,000 house with a 5% commission, they earn $5,000.
Commissions allow employers to reward higher performance, and can often allow employees to earn sums far in excess of their base salaries. In this sense, they are often a win-win situation for the employer and the employee; when the company profits, so does the employee. Sales commission plans can often become complex, however, and having all parties understand plans in detail is essential to a positive outcome.