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When it comes to motivating and rewarding salespeople, choosing the right sales commission structure is essential. The wrong plan can demotivate your sales reps or lead to misaligned behaviors, while the right one boosts performance, drives revenue, and supports your business goals. In this guide, we explore the most common commission structures, breaking down the pros and cons of each so you can decide which fits your sales organization best.
From tiered commission structures to flat-rate commission plans, this article covers the wide spectrum of commission pay structures used by businesses today.
Why Choosing the Right Commission Structure Matters
An effective sales rep commission structure aligns your team’s activities with your strategic goals, attracts top sales talent, and helps retain high performers. Whether you’re managing a small sales team or leading a national sales force, having a clear and well-structured salesperson commission structure is key.
Modern tools like commission software, i.e. Bentega, make it easier to manage complex models, but understanding the strengths and weaknesses of each plan is still critical.
Examples of Common Commission Structures
Here are some of the most common types of commission plans and how they work:
1. Tiered Commission Structure
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How it works: Higher commission rates are earned as sales volume increases (e.g., 5% for $0–$10K, 7% for $10K–$20K, 10% above $20K).
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Pros: Motivates reps to exceed goals; rewards top performers.
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Cons: Can encourage sandbagging (holding sales to hit higher tiers next month).
2. Base Salary Plus Commission
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How it works: Sales reps earn a fixed salary plus a variable commission based on performance.
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Pros: Provides income stability; attractive to new or risk-averse reps.
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Cons: Lower earning potential than full commission; may reduce urgency.
3. Flat-Rate Commission
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How it works: A fixed amount or percentage is paid per sale regardless of performance.
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Pros: Simple to calculate; works for transactional sales.
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Cons: Doesn’t reward high performance or complex deals.
4. Residual Commission
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How it works: Salespeople earn ongoing commissions for as long as the customer continues to pay (common in SaaS or subscription models).
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Pros: Incentivizes long-term client relationships.
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Cons: Takes time to build income; hard to attribute churn.
5. Accelerated Commission
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How it works: Once a salesperson hits quota, their commission rate increases on additional sales.
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Pros: Drives over-performance; keeps reps selling after quota.
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Cons: Requires careful modeling to avoid overpayment.
6. Straight-Percentage Based Commission
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How it works: A consistent percentage is paid on every sale, regardless of quota.
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Pros: Simple; directly ties effort to reward.
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Cons: Can lead to inconsistent income; no guardrails.
7. Quota-Based Commission
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How it works: Reps earn commission only after reaching a set sales target.
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Pros: Encourages goal-oriented performance.
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Cons: Demotivating if quotas are unrealistic.
8. Capped Commission Structure
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How it works: Common in consulting, reps earn based on their performance, but the commission is capped to ensure consultants don't sell more than they have capacity to deliver.
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Pros: Ensures reps are motivated to reach their quota.
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Cons: No incentive to push beyond the cap.
9. Jigsaw Structure
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How it works: Each step of the sales cycle (prospecting, demo, close) is handled by different reps, with commission split among them.
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Pros: Specialization boosts efficiency.
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Cons: Complexity in tracking and attribution.
10. Flat-Rate Decelerator
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How it works: Commission percentage decreases as sales volume increases beyond a cap.
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Pros: Controls overpayment risk; good for capped revenue environments.
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Cons: Can demotivate top performers.
👉For more information and visuals on each model, please visit our page on Commission Structures.
How to Choose the Right Commission Pay Structure
When deciding on the right structure commission model, consider:
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Sales Cycle Length: Short cycles may benefit from flat-rate plans, while long ones may suit residual or quota-based models.
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Deal Complexity: More complex deals may need higher incentives or team-based models.
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Revenue Predictability: Stable revenue supports residuals; volatile sales might need simpler plans.
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Rep Experience: New reps may prefer base salary; experienced ones may thrive on commission-only models.
Using commission software like Bentega can help model and manage even the most complex commission structures, while providing visibility and fairness to your team.
Final Thoughts
There’s no one-size-fits-all sales commission structure. The best model depends on your goals, sales process, team makeup, and industry. By understanding the different types of commission - from tiered commission structures to the jigsaw structure - you can build a plan that drives performance and retains top talent.
Want help designing the right sales rep commission structure for your business? Bentega’s commission consultants and intelligent commission software can guide you every step of the way.
Explore more
Bentega helps companies simplify and optimize their sales commission structures. Whether you're managing a sales rep commission structure, planning for accelerated commissions, or exploring the jigsaw structure, our commission software makes it easy to track, calculate, and motivate. Explore our tools and consulting services to build a fair, scalable, and effective commission pay structure today.
