A sales commission structure is the rule that turns results into variable pay: what is measured, at what rate, and how the rate changes as results grow. Most plans are built from a small set of standard mechanics. This library explains each one in a few lines, gives a tiny worked example and points to the calculator that runs it on your numbers; for a full plan with several layers combined, use the sales commission calculator.
All figures below are illustrative and chosen for easy arithmetic. They are not benchmarks or recommendations.
Rate structures
Flat rate
One rate on every dollar of credited revenue, from the first dollar. Easy to explain and to administer, but it pays the same for the last deal of the year as for the first.
Example: 8% on $50,000 of bookings = $4,000.
Marginal (graduated) tiers
Revenue is cut into bands and each band carries its own rate, like tax brackets. Pay rises smoothly; there is no jump at a threshold.
Retroactive tiers
When the rep crosses into a higher tier, the higher rate applies to all revenue in the period, not just the revenue above the threshold. This creates a cliff: a small extra deal can move pay sharply.
Example, same tiers for both: 5% up to $100,000, 8% from $100,000 to $200,000, 10% above $200,000.
| Bookings | Marginal tiers | Retroactive tiers |
|---|---|---|
| $199,000 | $5,000 + $7,920 = $12,920 | 8% × $199,000 = $15,920 |
| $201,000 | $5,000 + $8,000 + $100 = $13,100 | 10% × $201,000 = $20,100 |
| $250,000 | $5,000 + $8,000 + $5,000 = $18,000 | 10% × $250,000 = $25,000 |
Under retroactive tiers, $2,000 of extra bookings adds $4,180 of commission at the $200,000 threshold. The tiered commission calculator shows both methods side by side, with the dollar gap at each cliff.
Shaping the payout curve
Accelerators
A higher rate on revenue above quota (or above another threshold), often expressed as a multiplier of the base rate. They reward overperformance and make the last deals worth chasing.
Example: quota $1,000,000, base rate 10%, 1.5× above quota. At $1,200,000: $100,000 + $200,000 × 15% = $130,000. Run your own bands in the accelerator calculator.
Thresholds and decelerators
A threshold pays nothing until attainment reaches a minimum. A decelerator pays a reduced rate below a point instead of nothing. Both stop the plan from paying full rate for very low performance.
Example: quota $600,000, rate 10%. With a 50% threshold that pays from the first dollar once crossed, $240,000 (40%) pays $0 and $360,000 (60%) pays $36,000. With a decelerator instead (5% up to $300,000, 10% after), $360,000 pays $15,000 + $6,000 = $21,000. The pay curve calculator draws the whole curve.
Caps
A ceiling on total commission, or on commission from one deal. Caps make cost predictable but remove the incentive to sell past the cap and can push reps to delay deals.
Example: variable target $60,000, cap at 200% of target ($120,000). A rep whose uncapped commission is $140,000 is paid $120,000 and forfeits $20,000. See where a cap binds with the commission cap calculator.
What the commission is paid on
Gross-margin commission
The rate applies to gross margin (revenue minus cost of goods or delivery) rather than to revenue. It makes discounting visible in the rep’s own pay.
Example: 20% of margin on a $100,000 deal costing $60,000 = $8,000. A 10% discount (revenue $90,000, same cost) cuts margin to $30,000 and commission to $6,000, a 25% drop. At 8% of revenue, the same discount would cut commission only from $8,000 to $7,200. Compare both in the gross margin commission calculator.
Multi-year and ACV kickers
A recurring-revenue plan can pay on first-year contract value (ACV) and add a smaller “kicker” rate for committed later years, so multi-year terms are rewarded without paying full rate on revenue not yet delivered.
Example: 10% on $60,000 of first-year ACV = $6,000, plus 2% on $120,000 committed for years two and three = $2,400. Total $8,400.
Residual and renewal commission
A rate on renewals or on ongoing revenue from accounts the rep keeps. It rewards retention, but it can also pay for revenue that would have renewed anyway, which is a reason to set it below the new-business rate.
Example: 3% on a $50,000 renewal = $1,500. The SaaS commission calculator handles ACV, kickers, expansion and renewals together.
Who gets the credit
Splits
One deal’s commission is shared between several people, by fixed percentages or by role. Splits must be written down before the deal closes, or they become disputes.
Example: $10,000 of commission split 60/40 pays $6,000 and $4,000. Some plans instead give full credit to each person (double crediting), which raises cost. Try it in the commission split calculator.
Team or pooled commission
The team earns a pool based on team results, which is then divided by a set rule. It encourages cooperation but weakens the link between one person’s effort and their pay.
Example: 2% of $3,000,000 of team revenue = $60,000 pool, split equally among four reps = $15,000 each.
Timing and cash flow
Draws against commission
An advance paid each period and offset against commission earned. A recoverable draw carries any shortfall forward; a non-recoverable draw forgives it.
Example (recoverable, $3,000 per month): month 1 earns $2,000, the rep is paid $3,000 and owes $1,000. Month 2 earns $5,000; the $1,000 is recovered and the rep is paid $4,000. Model a full year in the recoverable draw calculator, and read the draw against commission guide.
Bonuses alongside commission
MBO bonuses
A target bonus paid on management-by-objectives goals (a launch, a certification, forecast accuracy), each with a weight. Useful for work that revenue does not measure, but goals must be specific enough to score.
Example: $10,000 target, three objectives weighted 50/30/20, scored 100%, 50% and 0%: $5,000 + $1,500 + $0 = $6,500. The sales bonus calculator applies weights, thresholds and caps.
SPIFFs
A short, targeted incentive on top of the plan: a fixed amount per deal of a new product, or for a specific action within a set window.
Example: $500 for each new-product deal closed this quarter; six deals pay $3,000. Check cost and payback with the SPIFF calculator and the SPIFF guide.
Choosing and combining structures
Each mechanic answers one design question:
| Question | Mechanic |
|---|---|
| How much per dollar? | Flat rate, tiers |
| What happens above quota? | Accelerators, caps |
| What happens far below quota? | Thresholds, decelerators |
| Which revenue counts? | Margin, ACV, kickers, renewals |
| Who is credited? | Splits, team pools |
| When is cash paid? | Draws, clawbacks |
| What else matters this period? | MBOs, SPIFFs |
The step-by-step method for combining them is in the sales compensation plan guide, and ready-made structures are in our commission plan templates.
Key takeaways
- Every plan is a combination of a few standard mechanics; name each one explicitly in the plan document.
- Marginal tiers pay smoothly; retroactive tiers create cliffs that reps will notice and manage around.
- Accelerators, thresholds and caps shape the curve above and below quota more than the base rate does.
- Margin-based pay and ACV kickers change which revenue is rewarded, not just how much.
- Test any combination on your own numbers before you publish it.
Frequently asked questions
What is the most common sales commission structure?
We do not publish a ranking of structures because we have no sourced survey data to support one. In practice most plans combine several mechanics: a base rate, a tier or accelerator above quota, and rules for splits and clawbacks. Choose the combination that pays for the behavior you want, then test it on realistic attainment.
What is the difference between marginal and retroactive tiers?
With marginal (graduated) tiers, each rate applies only to the revenue inside its band, like income-tax brackets. With retroactive tiers, reaching a higher tier re-prices all revenue at that tier's rate, which creates a jump in pay at each threshold.
Can one plan use several structures at once?
Yes. A plan can pay a base rate with marginal tiers, accelerate above quota, cap the total, add a multi-year kicker and run a SPIFF for one quarter. Each layer adds administration and makes statements harder to explain, so add a mechanic only when it changes behavior you care about.
Which structure is best for new sales reps?
New hires can be handled with ramp rules rather than a different structure: a reduced quota for the first months, sometimes a draw or guarantee. The sales ramp calculator and the recoverable draw calculator show what those choices cost.