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Explain the commission payment system, and outline alternative approaches.1Q
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A commission payment system is a compensation structure where employees, typically in sales roles, earn a percentage of the sales they generate. This system incentivizes employees to increase their sales performance, as their earnings are directly tied to their Show more…
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Some workers in the economy are paid a flat salary and some are paid by commission. Which compensation scheme would require more monitoring by supervisors? In which case do firms have an incentive to pay more than the equilibrium level (as in the worker-effort variant of efficiency-wage theory)? What factors do you think determine the type of compensation firms choose?
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