What does salary plus commission mean?

Salary plus commission means that an employee is paid a small base salary regardless of performance along with a performance-based incentive known as a commission. Commissions generally take the form of a percentage of an employee's sales but may also be based on other performance criteria.

The salary plus commission pay structure is a common practice in both business-to-business and direct consumer sales. The underlying idea of commission-based compensation is to align the employee's goals with those of the company as a whole. Commission-based pay also moves a portion of the employee's salary from a fixed expense to a more manageable variable expense associated with the product or service.