It's an amount of money paid above a base pay. This amount represents future commissions not yet earned by the sales person. This is done in order to provide a more stable paycheck during the initial "on-boarding" process as well as during lean times.
Frankly, I never understood why sales professionals don't just work for a good wage and that's it. The very engineers who build the products earn a decent wage, work long hours, are continuously studying and sharpening their skills and devoted years of schooling to even be able to get the job.
In my early exposure to sale folk I recoiled at the idea of paying someone commission because I felt that if one person got commissions then everyone involved in bringing the product to market was just as entitled to them. Of course, the problem is far more complicated than that and I quickly learned you simply could not hire a good sales person unless they saw some kind of pot of gold at the end of the rainbow. That's just the way that side of the universe has devolved and that's it.
One approach I have never tried is to have everyone on stock options. Pay the sales folks a good salary, not some crapy $30K/y base + commissions. The theory being that they are going to want to work just as hard to get the company to a level where their stock will make them a bundle of money. A lot of folks in sales are very mercenary in nature and end-up living from battle to battle, commission to commission. This sets-up a situation where it might actually be difficult to convince them to use a forward looking approach and forgo the usual deal in favor of stocks at some time in the future.
My experience got me to the point where I determined it was a far better idea to identify someone with no sales experience and bring him/her up into sales from within the company. No bad habits, better connection to the business, actually thankful for bringing them up to a level where they could earn real money and a whole host of other benefits. Once I tried that approach and had good results I never hired another sales person from the "real world" again.
