What is the term for the compensation based on a percentage of an employee's sales?

The compensation based on a percentage of an employee's sales is referred to as commission. Commission serves as an incentive for employees, particularly in sales roles, to perform better and increase their sales figures. This system aligns the employee's goals with the company's objectives, as higher sales directly lead to higher earnings for the employee.

For instance, if a salesperson sells a product for $1,000 and has a commission rate of 10%, they would earn $100 for that sale. This structure encourages employees to maximize their sales efforts since their earnings are directly linked to their performance.

Other options represent different compensation structures. A bonus is typically a one-time payment awarded for achieving specific goals or performance milestones, rather than a percentage of ongoing sales. Salary indicates a fixed regular payment regardless of sales performance. Piece work refers to compensation based on the number of units produced or tasks completed, which is different from sales-based earnings.