Commission is a form of performance-based compensation paid to an employee after completing a specific task, most often selling a certain number of products or services. It is typically calculated as a percentage of the total sales value, directly tying an employee's earnings to their job performance. This structure is designed to motivate employees to achieve specific goals and increase productivity.
The word "commission" traces back to Latin, meaning to entrust or delegate authority. It entered English in the 14th century. Initially, it referred to a formal grant of power or a specific task assigned to a person or group.
This concept of entrusting a task naturally evolved into a form of payment for its successful completion. The practice became widespread in trade and sales, directly linking compensation to performance. This created a powerful incentive structure that remains fundamental in business today.
Commission structures are tailored to motivate specific sales behaviors and align with company goals. They can range from simple, fixed-rate models to more complex systems that reward higher performance.
While both terms can refer to groups of people, "commission" and "committee" serve fundamentally different purposes in a business context.
In any commission-based system, several key players and stakeholders interact in a dynamic relationship. Their roles and motivations are interconnected, shaping the outcomes for both individuals and the organization as a whole.
Commission-based pay structures have a significant impact on both employee behavior and company culture. While they can be powerful motivators for performance, they also carry potential downsides that can affect individuals and team dynamics.
How is commission calculated?
It's typically a percentage of the sale value but can also be a flat fee or based on a tiered system. The exact formula is always outlined in your employment or commission agreement, which serves as the definitive guide for your compensation.
Are commissions legally considered wages?
Yes, in most jurisdictions, earned commissions are legally considered wages. Employers are required to pay them according to the agreed-upon schedule, even if the employee has since left the company. Always check your local labor laws for specifics.
What happens to my commission if a customer returns a product?
Most commission plans include a "clawback" clause. This allows the company to reclaim the commission if a sale is reversed due to a customer return or a canceled contract, usually within a specified timeframe detailed in your agreement.
Lead scoring is the process of assigning points to leads based on their attributes and actions to determine their sales-readiness.
NoSQL ("Not only SQL") databases offer a flexible alternative to relational models, excelling at managing large and unstructured data sets.
Voice broadcasting is an automated system that delivers a pre-recorded voice message to a large list of phone numbers simultaneously.
Cold calling is a sales tactic where reps contact potential customers by phone who haven't previously expressed interest in their product or service.
A Point of Contact (POC) is the designated individual or department that serves as the main hub for information and communication on a matter.
Personalization in sales means tailoring outreach to a prospect's specific needs, interests, and context to make communication more relevant.
Learn about B2B sales, including key strategies for B2B success, types of B2B sales models, & B2B vs. B2C sales: understanding the differences.
Customer centricity is a business approach that puts the customer at the heart of every decision, aiming to build loyalty and long-term value.
Learn about bottom of the funnel, including maximizing conversions at the funnel's end, & strategies for nurturing bottom-funnel leads.
Learn about behavioral analytics, including implementing behavioral analytics successfully, & key metrics in behavioral analytics.
Event tracking is the method of collecting data on specific user actions, or 'events,' on a website or app, such as clicks or downloads.
Expansion revenue is the extra money a business makes from its current customers via upgrades, new products, or additional services.
A use case is a detailed description of how a user interacts with a system to achieve a specific goal, outlining the steps from start to finish.
Revenue intelligence is the process of collecting and analyzing customer data to provide insights that help sales teams make smarter decisions.
Sales metrics are quantifiable data points that track and measure a sales team's performance against specific goals and objectives.
A Customer Relationship Management (CRM) system is a tool that centralizes customer data to help manage interactions and nurture relationships.
Learn about B2B data erosion, including causes of B2B data decay, strategies to combat data erosion, & measuring the impact of data erosion.
Learn about bounce rate, including understanding bounce rate implications, key factors affecting bounce rate, & reducing your bounce rate effectively.
Generic keywords are broad search terms that lack specific details like brand or location. They attract a wide audience with less specific intent.
Ramp-up time is the period a new hire takes to get fully up to speed and become a productive member of your go-to-market team.
Accounts Payable (AP) is the money a company owes its suppliers for goods or services bought on credit. It's listed as a current liability.
A buying committee is a group of stakeholders within an organization who are jointly responsible for making major purchasing decisions.
A headless CMS is a back-end content repository that delivers content via API to any front-end, decoupling the content from its presentation layer.
Dynamic pricing is a strategy where businesses set flexible prices for products or services based on current market demands and other factors.
User-generated content (UGC) refers to any form of content, like images, videos, or text, created and shared by users on online platforms.
Buying criteria are the specific requirements and standards a customer uses to evaluate products or services before making a decision.
Progressive Web Apps (PWAs) are websites that look and feel like native mobile apps, offering features like offline access and push notifications.
A cold email is an initial outreach sent to a potential customer with whom you've had no prior contact, aiming to introduce your business.
Mid-market companies are businesses larger than small businesses but smaller than large enterprises, often defined by revenue or employee size.
Digital advertising is the practice of delivering promotional content to users through various online and digital channels like social media or search engines.
Objection handling in sales is the process of responding to a prospect's concerns about a product or service to move the deal forward.
Email verification is the process of confirming that an email address is valid and deliverable, which helps improve campaign performance.
Learn about B2B, including what is it, its key elements, the benefits of B2B partnerships, the differences between B2B and B2C, and strategies for effective marketing.
Social proof is a psychological phenomenon where people assume the actions of others reflect correct behavior for a given situation.
White labeling is when a company puts its own branding on a product or service that was actually produced by a different company.
Sales coaching is a process where managers help reps improve their skills and performance through personalized feedback, training, and guidance.
An Applicant Tracking System (ATS) is a software application that manages your entire hiring and recruitment process from a single dashboard.
Sales operations analytics is the practice of analyzing sales data to improve the efficiency and effectiveness of the entire sales process.
The awareness stage is the first step in the buyer's journey, where a potential customer realizes they have a problem or an opportunity to explore.
An account is a company or organization that you're targeting for sales. It can be a prospective, current, or even a past customer.
Pipeline coverage is a key sales metric. It's the ratio of your total open pipeline value to your sales quota for a specific period.
Sales enablement technology refers to software and tools that equip sales teams with the resources they need to close more deals efficiently.
A channel partner is a company that works with a manufacturer or producer to market and sell their products, software, or services to customers.
The Dark Funnel describes customer buying activities that are untrackable by companies, such as private chats and word-of-mouth referrals.
Net new business is revenue from customers who have never purchased from your company before. It’s a crucial indicator of sustainable growth.
Account-Based Marketing (ABM) is a focused B2B strategy where marketing and sales collaborate to target and convert high-value accounts.
A sales intelligence platform is software that provides sales teams with data and insights about prospects to help them sell more effectively.
Closed Lost is a sales term for a deal that didn't go through. The prospect decided not to buy, or the sales team disqualified them.
Learn about B2B intent data, including how B2B intent data enhances sales strategies, sources of B2B intent data, leveraging B2B intent data for competitiveness.
An Account Executive (AE) is a sales professional responsible for closing new business deals and managing existing client relationships to drive revenue.
Annual Recurring Revenue (ARR) is the predictable income a company expects to receive from its customers over a one-year period.
Integration testing is a software testing phase where individual modules are combined and tested together to verify their interaction.
Competitive analysis means identifying your rivals and assessing their strategies to pinpoint your own business's strengths and weaknesses.
Demand is the economic principle describing a consumer's desire and willingness to purchase a specific good or service at a particular price.
Learn about buyer intent data, including sourcing and interpreting buyer intent data, & key metrics in buyer intent analysis.
Lead nurturing is the process of developing and reinforcing relationships with buyers at every stage of the sales funnel.
Microservices is an architecture where apps are built as a collection of small, independent services that communicate with each other over APIs.
Buyer’s remorse is the sense of regret or anxiety that can arise after making a purchase, often questioning if it was the right decision.
SFDC stands for Salesforce Dot Com, a popular cloud-based CRM platform that helps companies manage their customer interactions and data.
Data security protects digital information from unauthorized access, corruption, or theft throughout its entire lifecycle.
Account-Based Marketing (ABM) software helps teams coordinate personalized marketing and sales efforts to land high-value customer accounts.
GPCTBA/C&I is a sales qualification framework for understanding a prospect's goals, plans, challenges, timeline, budget, and authority.
Firmographic data is information used to classify firms. It includes attributes like industry, employee count, location, and annual revenue.
GDPR compliance means following the EU's strict data protection laws to ensure the secure and lawful handling of personal data.
An AI sales script generator is a tool that uses artificial intelligence to create personalized sales scripts for any outreach scenario.
Marketing Operations (MOps) is the engine of a marketing team, managing the technology, processes, and people to run campaigns effectively.
Sales prospecting software automates the process of finding, contacting, and tracking potential customers to help sales teams build their pipeline.
Learn about B2B data enrichment, including benefits of B2B data enrichment, implementing B2B data enrichment strategies, B2B data enrichment vs. data cleaning.
Process Builder is a Salesforce automation tool that lets you create 'if/then' business processes with a user-friendly visual interface.
Learn about brag book, including crafting your outstanding brag book, essential components of a brag book, & brag book vs. resume: unveiling the differences.
Site retargeting is a marketing strategy that shows ads to people who have previously visited your website but left without converting.
Copyright compliance is adhering to laws that protect creative works. It involves legally using content by obtaining permission or licenses.
A Representational State Transfer (REST) API is a web service that uses a simple, stateless architecture for systems to communicate online.
A Simple Object Access Protocol (SOAP) API is a web service that uses XML to exchange structured information between different applications.
Webhooks are automated messages sent by an app when a specific event occurs. They push real-time data to another app's unique URL.
A sales call is a real-time conversation between a salesperson and a prospect, aiming to persuade them to purchase a product or service.
ABM orchestration aligns marketing and sales actions across channels to deliver seamless, personalized experiences to high-value accounts.
Lead scraping is the process of automatically extracting contact information and other relevant data about potential customers from online sources.
Contact discovery is the process of finding accurate contact details for potential leads, including names, emails, phone numbers, and job titles.
Average Revenue per User (ARPU) is a key performance indicator that calculates the average revenue generated from each user or subscriber.
Revenue Operations (RevOps) is a business function that aligns a company's sales, marketing, and customer service teams to drive predictable revenue.
Learn about B2B data platform, including key benefits of B2B data platforms, choosing the right B2B data platform, challenges in implementing B2B data platforms.
A Sales Development Representative (SDR) is a sales specialist who finds and qualifies new leads, building a pipeline for the sales team.
Workflow automation uses rule-based logic to run a sequence of tasks that would otherwise require manual human effort to complete.
Closed opportunities are potential deals that have concluded. They are categorized as either 'closed-won' (a sale was made) or 'closed-lost'.
A messaging strategy defines what your brand says, how it says it, and where it says it to connect effectively with your target audience.
A Salesforce Administrator is a certified professional who manages and customizes the Salesforce platform to meet a company's specific business needs.
A marketing attribution model is a framework for assigning credit to the marketing touchpoints that lead a customer to convert.
Single Sign-On (SSO) is an authentication method allowing users to access multiple applications with one set of login credentials.
A sales pipeline is a visual representation of where prospects are in the sales process, from the first contact to the final sale.
Email marketing is a digital strategy where businesses send targeted emails to prospects and customers to build relationships and drive sales.
Account mapping is comparing your customer list with a partner's to find common prospects and unlock new sales opportunities.
Sales acceleration refers to strategies and technologies designed to speed up the sales cycle, enabling reps to close more deals, faster.
A Call for Proposal (CFP) is a document that solicits proposals, often through a bidding process, for a specific project or service.
Product-Led Growth (PLG) is a business strategy where the product itself drives user acquisition, conversion, and expansion.
User interaction is any action a user takes within a digital interface, like clicking a button, scrolling a page, or filling out a form.
Lead generation software helps businesses automate finding and capturing potential customers' contact information to build sales pipelines.
Logo retention is a key B2B metric that measures a company's ability to retain its customers, or 'logos,' over a specific period.
A Target Account List (TAL) is a focused list of high-value companies that a business specifically aims to convert into customers.
Consultative selling is an approach where salespeople act as expert advisors, diagnosing customer needs to provide the most suitable solutions.