Future Business Leaders of America (FBLA) Hospitality Management Practice Test

What is a commission?

1. A fixed payment for services rendered

2. A fee based on a percentage of sales

3. A regular salary received by employees

4. A one-time bonus for exceeding sales expectations

The correct answer is: A fee based on a percentage of sales

A commission refers to a fee or compensation that is calculated as a percentage of sales or revenue generated. This payment structure is commonly used in sales positions, where employees earn a commission based on the deals they close or the products they sell. This approach incentivizes employees to increase their sales, as their earnings directly correlate with their performance. The characteristic that defines a commission is its variability—it fluctuates with sales performance, unlike a fixed payment for services rendered, which remains constant regardless of the sales made. Additionally, commissions are distinct from regular salaries, which provide a stable income without direct ties to sales outcomes. One-time bonuses for exceeding sales expectations offer an additional reward but do not represent the ongoing compensation structure established by commission-based pay. Understanding the concept of commission is crucial in hospitality and sales-driven industries, where motivating staff through performance-related pay can significantly impact overall business success.