At the risk of stating the obvious lets quickly frame up base salary vs commission et al. Think of base salary like a steady paycheck for showing up—it’s like paying rent every month whether you use all the rooms or not. But commission is more like getting a bonus every time you help sell something big—it’s like getting a slice of the pizza WHEN you bring a NEW pizza to the table. Other pay structures, like bonuses or profit-sharing, are more like dessert—you might get some after a great meal, but it’s not always guaranteed and if linked to broader company performance then it’s largely out of your control as an individual.

So… why do we have commissions today?  Here is a directional way we think about it at SkillBuilder.io:

Early 19th Century: Commission-based sales began to emerge during the Industrial Revolution when businesses needed to incentivize traveling salespeople. Companies like Singer Sewing Machines and National Cash Register adopted this model to expand market reach.

1880s: National Cash Register (NCR) popularized sales training and commission-based compensation. They recognized that paying salespeople a percentage of sales increased motivation and productivity.

1930s Great Depression: Commission-based sales became more widespread during the Great Depression. Businesses had to cut costs and shifted to commission as a way to maintain sales forces without guaranteeing salaries.

Rise of the Insurance Industry: The 20th century saw the growth of industries like insurance and real estate, where commission models dominated. Literal agents were motivated to sell high-value policies or homes, earning a percentage of the sale.

1970s-1980s: As everything started to shift more and more global, the commission model became a core aspect of functions like automotive sales, where dealerships paid salespeople a portion of the sale price, often between 10% to 25%.

Modern-ish Commission Rates: Today, commission structures can vary widely by industry. For example, real estate agents often earn (or at least did until recently) 5-6% on home sales, while tech and specifically SaaS sales reps may earn 10-20% based on various pricing models.

The appeal is simple: compensate salespeople not for their time, but for their success. Then, both employer and employee share the risks and rewards of selling.

The Psychology of a Commission Model:

At its core, commission-based compensation is about sharing the risk and the reward. Traditional salaried roles are largely transactional — employees are paid regardless of whether they achieve their targets. This model doesn’t always incentivize top performance because there’s little direct correlation between effort and reward. Commission flips this dynamic on its head. Salespeople with commission structures are driven to close deals because their earnings depend on it.

Benefits become obvious when it’s a well designed incentive plan:

• Motivation through Ownership: Salespeople feel a greater sense of ownership in the outcome. The more they succeed, the more they earn, which fosters a mentality of self-driven performance.
• Shared Risk, Shared Reward: Commission aligns incentives between employers and employees. With a lower base salary but higher variable compensation, the employer reduces their financial risk in periods of slow sales. In return, employees can reap significant financial rewards during periods of huge growth.
• Scarcity and Urgency: Commission inherently introduces a sense of scarcity—compensation only comes if goals are hit. This creates urgency and drives salespeople to prioritize high-value activities (i.e., outcomes instead of just effort).

Everyone wins in this model. The company can reduce upfront costs and only pay for results. Employees are incentivized to maximize their own earning potential, aligning their interests with that of the business.

So why AI Should be Paid on Commission?!?!

Today, many businesses treat AI systems like SaaS (Software-as-a-Service) platforms—paying a flat fee or subscription or a consumption model for access and performance. But what if we considered AI not as a passive tool, but as a proactive agent capable of real, measurable contributions to sales and business growth?

Here is where we land at SkillBuilder.io:

1. AI Can Drive Measurable Outcomes: Like human salespeople, AI-powered systems in sales can directly contribute to revenue generation. AI can handle qualification and lead scoring, and even transactional sales, meaning its performance is tied to concrete business outcomes—just like a human salesperson.  Are AI Salespeople perfect today? No, but we are getting closer and closer to replicating if not evolving the B2B stack of BDR/SDR → Sales Engineer/Product → Account Exec, etc and we already have the ability for AI to push beyond simple qualification and into solution building.
2. Aligning AI Performance with Business Success: By tying AI compensation to key performance indicators (KPIs) like sales growth, conversion rates, or customer retention, businesses create a clear incentive for AI vendors to ensure the system is continually optimized for maximum impact, no effort. Instead of paying a static monthly fee, businesses would only pay based on the actual value AI delivers.
3. Risk Sharing with AI Partners: A commission-based model for AI shifts some of the risk to AI partners, aligning their incentives with the success of the business. Partners would be motivated to fine-tune their systems and algorithms to consistently improve outcomes, while businesses pay for proven results instead of just promises.
4. Encouraging Innovation in AI Services: Success-based compensation would push AI developers and innovators to adapt continuously. Knowing their revenue is tied to their AI’s performance would encourage greater investments in system upgrades, real-time optimization, and breakthrough innovations that deliver better business results.
5. A New Paradigm for AI Value: AI shouldn’t just be treated as a piece of software. By compensating AI on commission, we recognize its evolving role as an active, dynamic contributor to business strategy, capable of driving real economic value in ways that are often indistinguishable from a human employee.

Why are we talking about this now?  The market is flooded with a “drawer full of apps” where you can’t move in any direction without either running into a simple chatbot wrapper or some version of scraping, enriching, or email et al writing tool. These are tools and hopefully tools that help extend the capacity and/or capabilities of the team.  While this feels exciting on the surface it’s not great for the buyers, like you, of the services (superficial or opportunistic apps evaporate every day) and it’s not great for the long term AI builders if the noise drowns out the people committed to business models that align incentives.

It's a simple question? Do you want your AI partner to share risk aligned with YOUR success or get paid regardless of how it works.

It’s not clear yet when and how AI will get paid, like human colleagues, but it’s coming and we can’t wait for it.

‍