← Back to Glossary
Commission
Definition
Commission is a payment based on a percentage of sales or transactions, commonly used in sales roles to incentivize performance.
Explanation
Commission structures vary widely. Some sales roles are 100% commission with no base salary, while others combine a base salary with commission. Common commission rates range from 5-20% of sales value. Real estate agents, car salespeople, and insurance agents often work on commission.
Commission-based income is variable and can make financial planning challenging. Successful sales professionals can earn significantly more than their base salary through commissions.
Example
A real estate agent earning a 3% commission on a $400,000 home sale receives $12,000, typically split with their brokerage.