Incentive vs. Commission: What's the Difference?
Edited by Harlon Moss || By Janet White || Updated on October 14, 2023
An incentive motivates or encourages a desired action, while a commission is a specific amount paid for completing a sale or transaction.
Key Differences
At the core, both "incentive" and "commission" deal with motivation and compensation, but in different manners. An incentive serves as a motivation tool, whether monetary or otherwise, to drive desired behaviors or performance. Commission, on the other hand, is specifically a monetary compensation given to employees, often salespeople, based on the sales they make.
The realm of incentives is vast. They can take numerous forms – from bonuses, rewards, benefits to non-monetary perks like additional leave days. The primary objective is to boost motivation or productivity. Commission, being more specific, is typically a percentage of the sales value or a fixed amount per transaction, motivating the recipient to close more sales or meet certain targets.
Incentives can be short-term or long-term. For instance, a company might provide an incentive to teams for achieving a monthly target. Commissions, meanwhile, are usually recurrent and directly tied to individual transactions or the volume of sales within a certain timeframe.
While both incentives and commissions are used to spur desired behaviors, their structuring can differ. Incentives may be set up as competitions, tiered rewards, or bonuses. Commissions are often clear-cut, where individuals know exactly how much they will earn from a specific sale.
Comparison Chart
Nature
Broad motivational tool
Specific monetary reward for sales
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Application
Varied (can be for any role or objective)
Typically for sales roles
Form
Monetary or non-monetary
Usually monetary
Frequency
Can be one-time, periodic, or sporadic
Recurrent, per sale or transaction
Purpose
Boost motivation, productivity, or behavior
Encourage sales and revenue generation
Incentive and Commission Definitions
Incentive
A motivation or encouragement
The bonus served as an incentive for employees to meet their targets.
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Commission
A fee paid to salespeople based on sales
She earned a 10% commission on every product sold.
Incentive
A thing that drives or urges to action
The prize was a great incentive for participants.
Commission
An amount or percentage received for a transaction
The agent takes a 5% commission for property deals.
Incentive
A reason for doing something
Eco-friendly products provide an incentive to protect the environment.
Commission
Earnings from sales or consignments
His monthly commission exceeded his basic salary.
Incentive
A reward or benefit for a particular action
The company offers travel incentives to top performers.
Commission
A directive or official task
The government set up a commission to investigate the issue.
Incentive
Something, such as the fear of punishment or the expectation of reward, that induces action or motivates effort.
Commission
The act of granting certain powers or the authority to carry out a particular task or duty.
Incentive
Serving to induce or motivate
An incentive bonus for high productivity.
Commission
The authority so granted.
Incentive
Something that motivates, rouses, or encourages.
I have no incentive to do housework right now.
Commission
The matter or task so authorized
Investigation of fraud was their commission.
Incentive
A bonus or reward, often monetary, to work harder.
Management offered the sales team a $500 incentive for each car sold.
Commission
A document conferring such authorization.
Incentive
Inciting; encouraging or moving; rousing to action; stimulating.
Commission
A public board or administrative body
The Federal Trade Commission investigates false advertising.
Incentive
Serving to kindle or set on fire.
Commission
Often Commission A ruling council within the Mafia that adjudicates family disputes and regulates family activities.
Incentive
Inciting; encouraging or moving; rousing to action; stimulative.
Competency is the most incentive to industry.
Commission
The act of committing or perpetrating
The commission of a crime.
Incentive
Serving to kindle or set on fire.
Part incentive reedProvide, pernicious with one touch of fire.
Commission
A fee or percentage allowed to a sales representative or an agent for services rendered.
Incentive
That which moves or influences the mind, or operates on the passions; that which incites, or has a tendency to incite, to determination or action; that which prompts to good or ill; motive; spur; as, the love of money, and the desire of promotion, are two powerful incentives to action.
The greatest obstacles, the greatest terrors that come in their way, are so far from making them quit the work they had begun, that they rather prove incentives to them to go on in it.
Commission
An official document issued by a government, conferring on the recipient the rank of a commissioned officer in the armed forces.
Incentive
A positive motivational influence
Commission
The rank and powers so conferred.
Incentive
An additional payment (or other remuneration) to employees as a means of increasing output
Commission
To grant a military commission to.
Incentive
A stimulant to prompt action
The discount acted as an incentive for customers to buy more.
Commission
To grant authority for (something to be made or done); place an order for
Commission a new symphony for the festival.
Commission
To authorize or engage (someone to do something)
Commission an architect to design a building.
Commission
To put (a ship) into active service.
Commission
A sending or mission (to do or accomplish something).
Commission
An official charge or authority to do something, often used of military officers.
David received his commission after graduating from West Point.
Commission
The thing to be done as agent for another.
I have three commissions for the city.
Commission
A body or group of people, officially tasked with carrying out a particular function.
The European Commission
The Electoral Commission
The Federal Communications Commission
The company's sexual harassment commission made sure that every employee completed the on-line course.
Commission
A fee charged by an agent or broker for carrying out a transaction.
A reseller's commission
The real-estate broker charged a four percent commission for their knowledge on bidding for commercial properties; for their intellectual perspective on making a formal offer and the strategy to obtain a mutually satisfying deal with the seller in favour of the buyer.
Commission
The act of committing (e.g. a crime or error).
The commission, preparation or instigation of an act of terrorism
Commission
(transitive) To send or officially charge someone or some group to do something.
James Bond was commissioned with recovering the secret documents.
Commission
(transitive) To place an order for (often a piece of art).
He commissioned a replica of the Mona Lisa for his living room, but the painter gave up after six months.
Commission
To put into active service.
The aircraft carrier was commissioned in 1944, during WWII.
Commission
The act of committing, doing, or performing; the act of perpetrating.
Every commission of sin introduces into the soul a certain degree of hardness.
Commission
The act of intrusting; a charge; instructions as to how a trust shall be executed.
Commission
The duty or employment intrusted to any person or persons; a trust; a charge.
Commission
A formal written warrant or authority, granting certain powers or privileges and authorizing or commanding the performance of certain duties.
Let him see our commission.
Commission
A certificate conferring military or naval rank and authority; as, a colonel's commission.
Commission
A company of persons joined in the performance of some duty or the execution of some trust; as, the interstate commerce commission.
A commission was at once appointed to examine into the matter.
Commission
The acting under authority of, or on account of, another.
Commission
To give a commission to; to furnish with a commission; to empower or authorize; as, to commission persons to perform certain acts; to commission an officer.
Commission
To send out with a charge or commission.
A chosen bandHe first commissions to the Latian land.
Commission
A special group delegated to consider some matter;
A committee is a group that keeps minutes and loses hours
Commission
A fee for services rendered based on a percentage of an amount received or collected or agreed to be paid (as distinguished from a salary);
He works on commission
Commission
The act of granting authority to undertake certain functions
Commission
The state of being in good working order and ready for operation;
Put the ships into commission
The motor was out of commission
Commission
A group of representatives or delegates
Commission
A formal statement of a command or injunction to do something;
The judge's charge to the jury
Commission
An official document issued by a government and conferring on the recipient the rank of an officer in the armed forces
Commission
The act of committing a crime
Commission
A special assignment that is given to a person or group;
A confidential mission to London
His charge was deliver a message
Commission
Put into commission; equip for service; of ships
Commission
Place an order for
Commission
Charge with a task
Commission
The act of entrusting or assigning a task
The artist received a commission to paint a mural.
FAQs
Is commission a type of incentive?
Yes, it's a specific form of monetary incentive tied to sales.
Do all employees get incentives?
Not necessarily. It depends on the company's policies and individual roles.
Are incentives always monetary?
No, incentives can be non-monetary, like extra vacation days or gifts.
Can a person receive both an incentive and a commission?
Yes, many salespeople might earn commissions plus additional incentives for surpassing targets.
Can a commission be a fixed amount?
Yes, it can be a fixed amount per sale or a percentage of the sale value.
Do all companies offer incentives?
Not all. The provision of incentives depends on company policy, budget, and objectives.
Are commissions taxable?
Yes, in most jurisdictions, they are considered taxable income.
What's the main objective of a commission?
To motivate salespeople to close more sales and generate revenue.
Is a commission guaranteed?
No, it's contingent upon sales made or conditions met.
How often are commissions paid?
It varies – could be weekly, monthly, or at other intervals, depending on the agreement.
Can incentives be negative or punitive?
Typically, incentives are positive, but there can be negative incentives or disincentives.
Is commission offered only in sales jobs?
Primarily, but some roles might have commission-like structures for task completion.
Why do companies offer incentives?
To motivate employees, boost morale, and drive specific behaviors or outcomes.
Can incentives be team-based?
Absolutely, many companies offer team-based incentives to foster collaboration.
Can incentives be performance-based?
Yes, performance-based incentives are common to reward high achievers.
Is commission only for individual sales?
Typically, but there can be group or team commissions in certain structures.
Can customers receive incentives?
Yes, companies might offer incentives to customers for loyalty, referrals, or purchases.
Is commission always a percentage?
Not always. It can be a flat fee per sale or transaction.
How are incentives determined?
Companies might consider performance metrics, business goals, and budgetary constraints.
Can the rate of commission change?
Yes, employers might adjust it based on role, market conditions, or strategy changes.
About Author
Written by
Janet WhiteJanet White has been an esteemed writer and blogger for Difference Wiki. Holding a Master's degree in Science and Medical Journalism from the prestigious Boston University, she has consistently demonstrated her expertise and passion for her field. When she's not immersed in her work, Janet relishes her time exercising, delving into a good book, and cherishing moments with friends and family.
Edited by
Harlon MossHarlon is a seasoned quality moderator and accomplished content writer for Difference Wiki. An alumnus of the prestigious University of California, he earned his degree in Computer Science. Leveraging his academic background, Harlon brings a meticulous and informed perspective to his work, ensuring content accuracy and excellence.
