Commission
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A form of variable compensation paid to employees — usually in sales roles — as a percentage of the revenue or profit they generate.
## Commission
Commission is performance-based pay that directly ties compensation to sales results. It is the dominant pay structure for sales representatives, real estate agents, and financial advisors.
### Common Structures
| Model | Description |
|-------|-------------|
| Straight commission | 100% variable, no base salary |
| Base + commission | Fixed salary plus variable sales incentive |
| Tiered commission | Rate increases at higher sales thresholds |
| Draw against commission | Advance on future commissions |
| Residual commission | Ongoing payments from recurring revenue |
### Typical Rates
Commission rates vary widely: 5–10% for SaaS sales, 2.5–3% for real estate, and 10–50% for insurance. The total on-target earnings (OTE) typically split 50/50 to 70/30 between base and commission in enterprise B2B sales.
### Tax Treatment
Commissions are taxed as ordinary income in virtually all jurisdictions. In the US, they are classified as supplemental wages and may be withheld at the flat 22% rate.