How does salary and commission compensation work?

Salary and commission compensation is a hybrid payment structure that includes both a guaranteed base salary and additional earnings based on performance, typically reflected as a percentage of sales. This model incentivizes employees to achieve greater sales results while ensuring they have a steady income regardless of their sales performance.

By combining a base salary with commission, employees are motivated to sell more, knowing that their efforts directly contribute to their total compensation. This structure benefits employers as well, as it aligns the interests of employees with the financial goals of the company, driving productivity and sales growth.

The other options, while mentioning different types of compensation, do not encapsulate this dual model. For instance, receiving only a base salary does not provide any performance incentives, while a compensation model based solely on sales or tips would not guarantee reliable earnings regardless of sales performance. Thus, the correct answer effectively represents the combination of stability and motivation that salary and commission compensation achieves.