A commission plan is a structured compensation system that rewards employees, typically salespeople, based on their performance. It usually involves paying a percentage of the sales they generate, incentivizing them to increase their sales volume. This type of plan can motivate employees to work harder and achieve better results, aligning their interests with the company's goals. There are various types of commission plans, such as base salary plus commission, straight commission, and tiered commission. Each plan has its own advantages and disadvantages, depending on the company's objectives and the nature of the sales process. Understanding these options helps businesses design effective compensation strategies.