Definition - What does Commission mean?

A commission is a payment that an agent receives for doing work on behalf of a principal. Instead of being a wage or a payment received at an interval, this payment reflects a percentage of the sale that the agent made. This type of payment is commonly used in real estate.

In the context of the law, agents or employees are legally entitled to their commissions if they make a sale, and their contract states that they receive commissions upon sales.

Justipedia explains Commission

Commissions are basically just a form of payment that is different from a salary or standard wages. The benefit of a commission is that the employer or the principal only has to make it if the sale is made. This incentivizes the employee or the agent to sell.

Real estate agents are commonly paid on a commission base. The exact percentage that they get paid depends on their contract with the buyer or seller. The higher the percentage, the more they get paid upon making a sale.

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