A sales commission compensation plan is a type of time-based compensation system.

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Prepare for the AAMI Small Business Management Test with flashcards and multiple choice questions; each question comes with hints and explanations. Get exam ready!

Multiple Choice

A sales commission compensation plan is a type of time-based compensation system.

Explanation:
The key idea is how pay is determined: time-based pay rewards how long someone works, with a fixed or hourly rate, while performance-based pay rewards outcomes, like sales, regardless of hours worked. A sales commission plan ties earnings to the amount of sales generated, so pay varies with performance. Even when a base salary is included, the commission portion remains performance-driven, not tied to time worked, which means it isn’t time-based compensation. Therefore, the statement is false.

The key idea is how pay is determined: time-based pay rewards how long someone works, with a fixed or hourly rate, while performance-based pay rewards outcomes, like sales, regardless of hours worked. A sales commission plan ties earnings to the amount of sales generated, so pay varies with performance. Even when a base salary is included, the commission portion remains performance-driven, not tied to time worked, which means it isn’t time-based compensation. Therefore, the statement is false.

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