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commission‐based pay

Timothy J. Keaveny


A commission is incentive pay based on a percentage of the selling price of a product or service. Sales jobs are commonly paid partially or totally on commission. There are various systems of commission‐based pay. A straight commission is a plan in which the salesperson receives a fixed percentage of the sales price of the product or service. A graduated commission plan is one in which the percentage changes for higher sales volume, e.g., 5 percent commission for less than $500,000, 6 percent for $500,000 up to $750,000, and so forth. A salary plus commission plan is one in which the salesperson has a base salary to which a commission based on sales is added. Factors to be considered in the design of commission plans include the emphasis on customer service, nature of the product, and sales potential of the sales territory. When there is high concern for customer service, or when the product is technical and time is required to understand it, or when the sales territory has low market potential, one should consider having a significant salary component in the compensation plan. ( 1993 ). Compensation , 4th edn. Homewood, IL : Richard D. Irwin . ( 1991 ). The Sales Compensation Handbook . New York : AMACOM . ... log in or subscribe to read full text

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