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A commission is a fee or remuneration paid in return for services rendered.  Commission is often calculated as a percentage of the total transaction; a commission can be separate and in addition to fixed wages, or it can be the sole form of compensation, known as straight commission.

It is a useful method for resolving the principal-agent problem by incentivizing employees to expend maximum effort on behalf of their employer.  However, commission-based transactions may also create conflicts of interest, with unethical agents encouraging clients to enter into unnecessary or fraudulent transactions.

[Last updated in May of 2022 by the Wex Definitions Team]