A tiered commission structure is a compensation model where salespeople earn different commission rates based on their sales performance. As they reach specific sales targets or thresholds, the percentage of commission they earn increases. This system incentivizes employees to sell more, as higher sales lead to higher earnings. For example, a salesperson might earn a 5% commission on sales up to $10,000, but if they exceed that amount, their commission rate could rise to 7% for sales between $10,001 and $20,000. This encourages continuous effort and rewards top performers in a structured way.