A commission is defined as?

A commission is defined as?

• A. A fixed hourly rate.
• B. A base salary plus commission.
• C. An amount paid to an employee based on a percentage of the employee's sales.
• D. A discretionary quarterly bonus.

Answer: (C)

Commission is a form of variable pay tied directly to sales performance. It is the portion of an employee’s earnings that is calculated as a percentage of the sales they generate, so earnings rise with higher sales and fall with lower sales. This aligns the seller’s incentives with revenue generation for the company. A fixed hourly rate isn’t commission because it doesn’t depend on sales. A base salary plus commission describes a hybrid plan that includes a non-variable base pay; the term commission by itself refers to the variable portion earned from sales, not the entire compensation package. A discretionary quarterly bonus isn’t defined as commission because it isn’t a stated percentage of sales and may be awarded for various reasons rather than strictly for sales activity.

Commission is a form of variable pay tied directly to sales performance. It is the portion of an employee’s earnings that is calculated as a percentage of the sales they generate, so earnings rise with higher sales and fall with lower sales. This aligns the seller’s incentives with revenue generation for the company.

A fixed hourly rate isn’t commission because it doesn’t depend on sales. A base salary plus commission describes a hybrid plan that includes a non-variable base pay; the term commission by itself refers to the variable portion earned from sales, not the entire compensation package. A discretionary quarterly bonus isn’t defined as commission because it isn’t a stated percentage of sales and may be awarded for various reasons rather than strictly for sales activity.