Sales commission structures play a crucial role in how businesses reward performance and motivate their sales teams. Choosing the right sales rep commission structure can significantly impact revenue, employee retention, and sales growth. In this article, we’ll explore the most common commission pay structures, their advantages, and potential drawbacks, helping you make informed decisions that align with your company goals.
Whether you're designing a plan for a seasoned enterprise sales team or a new SDR squad, the right salesperson commission structure ensures alignment between company goals and individual performance. A well-crafted commission structure for sales can:
Encourage high performance
Improve sales team morale
Offer clear earning potential
Help manage compensation budgets
Let’s break down the most widely used commission structures.
Salespeople earn a percentage of each sale without a base salary.
Real estate agents, insurance brokers, and industries where reps operate like entrepreneurs.
High earning potential for top performers
Low fixed cost for the employer
Unstable income for reps depending on design
High turnover if goals aren’t met (or simply unrealistic)
Reps receive a fixed salary and earn commissions on top of that. Any sales commission structure can be combined with fixed salary, and the ideal mix between fixed and variable income depends on role, industry and market benchmark.
SaaS, tech, and B2B sales teams that need stability and performance incentives.
Financial stability for salespeople
Easier to budget for employers
May lower the drive for performance if base is too high
Can lead to complacency without clear performance thresholds
Commission rates increase as salespeople hit and exceed targets.
Motivating high achievers, upselling, and enterprise sales cycles.
Rewards exceeding expectations
Encourages aggressive performance near period ends
Can complicate payout calculations if not using a dedicated system like Bentega
Reps may “sandbag” deals to the next period, if not designed appropriately
Salespeople receive an advance (draw), which is deducted from future earned commissions.
Onboarding new sales reps, industries with long sales cycles.
Provides early cash flow for reps
Helps bridge slow ramp-up periods
Complex to administer
Can lead to rep dissatisfaction if performance lags
Ongoing commission on recurring revenue or repeat sales from the same client.
Subscription-based models (e.g., SaaS, especially Customer Success roles where a rep is assigned a portfolio of customers to take care of), agencies, or service industries.
Encourages long-term client relationships
Rewards retention and upselling
Slower upfront earnings
May be less motivating for short-term closers
Revenue-Based: Commission is based on total deal value. Profit-Based: Commission is based on the margin or profit generated from the deal.
Simpler to calculate
Encourages volume sales
Encourages smarter pricing and discount control
Aligns with business profitability
Selecting between revenue and profit-based commission pay structures depends on your business priorities - volume vs. margin.
When evaluating commission structures for sales, consider:
Sales cycle length
Average deal size
Ramp-up period for reps
Market competitiveness
Customer retention goals
Balancing motivation and fairness is key. The right sales rep commission structure will differ between industries, and even between roles within the same company.
Understanding and choosing the right commission structures is crucial for any growing sales organization. Whether you're scaling a startup or optimizing an enterprise sales force, your commission structure for sales can be a game-changer. Revisit your plan regularly to adapt to market shifts, business strategy, and sales rep feedback.
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