A well-designed tiered commission structure is one of the most powerful ways to drive performance in your sales team. Instead of offering a flat commission, a tiered compensation structure increases the commission rate as reps close more deals or hit higher revenue brackets.
This scalable approach not only motivates reps to exceed quota - it also aligns incentives with your business growth goals. In this article, we’ll break down how a tiered commission plan works, share a real tiered commission structure example, and explain how tools like a t can help you get started.
A tiered sales commission structure rewards salespeople based on their performance across predefined thresholds or "tiers". Essentially a commission rate is assigned to different brackets, and the sales rep earns commission based on the corresponding bracket or tier.
Although structure is important, how you apply the tiered commission model also matters. Let's consider an example, where the tiered commission structure is as presented here:
Tier 1: 5% commission on sales up to $10,000
Tier 2: 7% commission on sales between $10,001–$25,000
Tier 3: 10% commission on all sales beyond $25,000
As reps sell more, their commission rate increases, creating a built-in incentive to keep selling beyond the base target.
Motivates overachievement – reps are driven to go beyond quota.
Aligns with company growth – higher revenue = higher payouts.
Flexible – can be tailored for different roles, products, or regions.
Scalable – grows naturally with business and team size.
Although structure is important, how you apply the tiered commission model also matters. Let’s say your company offers the following tiered commission plan:
| Monthly Sales | Commission Rate |
|---|---|
| $0 – $10,000 | 5% |
| $10,001 – $25,000 | 7% |
| $25,001+ | 10% |
Due to the tiered commission model's complex nature, companies often take the easy way out and pay commission for each sale within the corresponding bracket, meaning two separate sales of $30,000 yields 10% commission each, or $6,000 in commission ($3,000 + $3,000).
For the company to fully leverage this model in terms of ROI, however, the two sales combined sums up to $60,000. Applying the tiered commission structure as intended, the payable commission would be:
Tier 1: 5% commission = $500, ($10,000 x 5%)
Tier 2: 7% commission = $1,050 ($15,000 x 7%)
Tier 3: 10% commission = $3,500 ($35,000 x 10%)
Total commission for a sales rep closing $60,000 in sales = $5,050. That is $950 that could have been invested elsewhere.
Considering the ROI for the two examples, there's no doubt that how you apply the tiered commission model matters:
Assuming a gross margin of 80%, and sales reps on 100% commission, and no other related costs the commission plan ROI in the first example (sales reps earns commission based on the amount per sale) would be:
ROI = (Net Profit or Gain from Investment / Cost of Investment) * 100
ROI = (((Sales x Gross Margin) - Commission) / Commission) * 100
ROI = ((($60,000 x 80%) - $6,000) / $6,000) * 100 = (($48,000 - $6,000) / $6,000) * 100
ROI = ($42,000 / $6,000) * 100 = 700%
For the case where the tiered commission structure is applied as intended (triggering the commission rates based on the accumulative value of the sales), the compensation plan ROI would be:
ROI = ((($60,000 x 80%) - $5,050) / $5,050) * 100 = (($48,000 - $5,050) / $5,050) * 100
ROI = ($42,950 / $5,050) * 100 = 850%
The compensation plan ROI increases by 150%, and is improved by 21.5% (850/700).
This structure rewards high performance while preserving margin on smaller deals. If you'd like to model your own plans, a tiered commission calculator, like Bentega, can make things easy. And yes, of course you will get a free trial.
A tiered pay structure works especially well when:
Your deals have wide variability in value
You want to strongly incentivize overperformance
You want to create healthy competition among sales reps
You sell subscription services and want to boost average contract value (ACV)
Define clear tiers – set transparent breakpoints
Avoid too many levels – 3-4 tiers are usually optimal
Communicate frequently – reps should understand how to maximize earnings
Use software tools – automate calculations with tiered commission software like Bentega
Using a tiered commission calculator helps:
Avoid calculation errors
Save time in payroll and reporting
Model different tiered compensation structure scenarios easily
If you don’t have one yet, Bentega’s integrated commission tracking features can serve as your all-in-one tiered commission calculator Excel alternative.
A tiered commission structure is a powerful way to scale incentives and align pay with performance. Whether you’re managing a small sales team or scaling a fast-growth company, tiered structures create built-in motivation for reps to aim higher—and win more.
Ready to implement a tiered commission plan? Start with a clear structure, model it with a tiered commission calculator, and let software like Bentega help you automate and optimize every step.
Bentega makes it easy to implement and manage a tiered commission structure with our powerful commission software. Whether you’re using a simple tiered commission calculator or building a complete tiered compensation structure across teams, Bentega helps you streamline every step. Track sales, automate payouts, and scale with confidence—no spreadsheets needed.