Sales Compensation: Plans, Models, Examples & How to Build One

Sales Compensation: How to Structure Pay for Your Sales Team

A sales rep with a $60,000 base salary and no clear path to more will eventually leave for a company that pays for performance. A rep with an uncapped commission plan but no base will burn out chasing quota during a slow quarter. Sales compensation is the balancing act between those two failure modes  and getting it wrong shows up fast, in turnover, in missed targets, and in reps who quietly stop pushing once they’ve hit enough.

What Is Sales Compensation?

Sales compensation is the total pay a salesperson earns for hitting their targets: base salary plus variable pay tied to performance, such as commission, bonuses, and both. In one sentence: sales compensation = base salary + variable compensation + incentives tied to performance.

It’s usually expressed as OTE, and on-target earnings  the amount a rep takes home if they hit 100% of quota. A rep with a $70,000 base and $70,000 in commission at quota has an OTE of $140,000, even though their actual paycheck could land well above and below that number depending on how the quarter goes.

The reason sales compensation gets so much attention isn’t just payroll math. It’s the single biggest lever a company has over what its sales team actually does. A plan that pays flat commission on every deal regardless of size will fill a pipeline with small, easy wins. A plan that rewards only net-new logos will starve renewals and upsells. Reps optimize for whatever the plan measures, not for what leadership assumes they’ll prioritize.

Most sales compensation plans are built from a handful of moving parts: a base salary that provides income stability, a variable component tied to a quota, a defined quota and target, and a payout structure (linear, tiered, and accelerated) that determines how variable pay scales with performance. Some plans add bonuses on top for hitting milestones, and manager-level plans add a layer for overseeing a team’s collective number. The rest of this article breaks down each of these pieces: the sales compensation plan itself, how the pieces work together, the common salesperson compensation models, how to calculate payouts, the bonus structures companies use to shape behavior, a sample plan and template you can adapt, and how to build a plan from scratch.

What Is a Sales Compensation Plan?

Sales compensation and a sales compensation plan are related but not identical. Sales compensation is the overall concept of how a salesperson gets paid. A sales compensation plan is the specific, documented set of rules that determines how that pay is earned and calculated for a given role and period.

A complete sales compensation plan typically defines:

• Base salary  the fixed, guaranteed portion of pay
• Variable compensation  the target performance-based pay at 100% quota
• Quota  the revenue and activity target the plan is measured against
• Commission rate  the percentage and amount paid per unit of eligible sales
• Bonus  any milestone-based payout layered on top of commission
• Accelerator/decelerator  rate changes above and below target attainment
• Payout frequency  how often variable pay is calculated and paid (monthly, quarterly)
• Eligibility rules  which deals, products, and revenue types count
• Performance period  the timeframe the quota and payouts apply to

Documenting each of these removes ambiguity for both the rep and finance, and it’s what turns “sales compensation” as a concept into a plan someone can actually be paid against.

How Does Sales Compensation Work?

At a practical level, a sales compensation plan comes together in a predictable sequence:

1. The company sets an OTE for the role, based on market rate and budget.
2. It chooses a base/variable split appropriate to the role.
3. It sets a quota  the revenue and volume target tied to full variable pay.
4. It calculates a commission rate (and rates) based on the quota and target variable pay.
5. It layers in accelerator, decelerator, and bonus rules to shape behavior beyond the baseline.
6. The rep earns variable compensation as they close business, based on actual attainment against quota.
7. Payout happens on the plan’s defined schedule, typically monthly and per pay period, sometimes with a quarterly true-up.

Each step depends on the one before it, which is why changing one piece of a plan, say, raising a quota without adjusting the commission rate  changes the effective pay-for-performance ratio even if nothing else on paper looks different.

Sales Compensation Models: Base vs. Variable Pay

The starting decision in any sales compensation plan is the split between base salary and variable pay. This ratio is usually written as base/variable; a 60/40 plan means 60% of OTE is guaranteed base salary and 40% is at-risk, performance-based pay.

Split	Common fit	Why
70/30 and 60/40	SDRs, BDRs, customer success reps with quota	Role involves more activity-based work (calls, meetings, renewals) with less direct control over closed revenue
50/50	Account executives, mid-market and enterprise sales	Balances income security with strong pay-for-performance on deals the rep directly closes
40/60 and 30/70	High-ticket, transactional, and commission-heavy roles (e.g., real estate, insurance, some outside sales)	Sales cycle is short and rep has near-total control over the outcome of each deal

These ratios are starting points, not universal benchmarks. The appropriate mix depends on role ownership, sales cycle length, deal complexity, territory, and how directly the seller controls the revenue outcome, not on industry alone. Heavier base splits reduce financial risk for the rep but dilute the incentive to overperform. Heavier variable splits create stronger pay-for-performance but raise income volatility, which can hurt retention if quotas are set unrealistically.

How to Calculate Sales Compensation

Simple commission formula: Commission = Commission Rate × Eligible Sales

This is the base case. In practice, “eligible sales” isn’t always raw revenue  plans can calculate commission against gross profit, annual contract value (ACV), bookings, units sold, renewals, or a blended mix of metrics, and many plans apply different rates at different tiers rather than one flat rate.

Worked example: A rep has a $60,000 base salary, a $700,000 annual quota, and a 10% commission rate on eligible revenue up to quota. If they close $700,000 in a year, their commission is $70,000 (10% × $700,000), bringing total compensation to $130,000.

That $130,000 breaks down to roughly 46% base and 54% variable  note this is different from the base/variable pay-mix language used above. The 60/40, 50/50, and similar ratios describe the planned split between base and target variable pay at 100% quota; they are not the same thing as the commission rate applied to revenue. A rep can be on a “50/50 plan” and still see their actual pay mix shift in a given year depending on how far above and below quota they land.

If the plan includes an accelerator  say, a 15% rate on revenue closed above 100% of quota  and the rep closes $800,000 instead, the math changes: $70,000 in commission on the first $700,000, plus 15% on the extra $100,000 ($15,000), for $85,000 in commission and $145,000 total compensation.

Understanding OTE, Quota, and Quota Attainment

Quota attainment is the percentage of a rep’s target that they actually hit: attainment = revenue closed ÷ quota × 100. It’s the single number most compensation plans key off of, since accelerators, decelerators, and bonuses are usually defined in terms of attainment thresholds rather than raw dollar amounts.

Using the $700,000-quota, 10%-commission example above, with a 15% accelerator above 100% attainment:

Quota attainment	Revenue closed	Commission earned
50%	$350,000	$35,000
75%	$525,000	$52,500
100%	$700,000	$70,000 (this is OTE variable)
125%	$875,000	$70,000 + 15% × $175,000 = $96,250

This is also where decelerators show up: some plans reduce the commission rate below a minimum attainment threshold (commonly somewhere in the 50-70% range) rather than paying the standard rate all the way down to zero.

Common Sales Compensation Structures and Bonus Types

Beyond base commission, most sales compensation plans layer in one and more of the following mechanisms to shape specific behavior. Not all of them are technically “bonuses”  accelerators and decelerators adjust the commission rate itself, while SPIFFs and draws are separate payout mechanisms.

Tiered Commission

The commission rate increases at defined revenue thresholds (e.g., 8% up to quota, 12% beyond it), rewarding reps more as they close more.

Accelerators

A higher commission rate that kicks in once a rep exceeds 100% of quota, used to keep top performers motivated instead of coasting after they hit target.

Decelerators

A reduced commission rate for reps who fall significantly below quota (commonly under 50-70% attainment), which controls payout risk on sustained underperformance.

SPIFFs (Sales Performance Incentive Funds)

Short-term, narrowly targeted bonuses: a flat cash amount for selling a specific product, hitting a milestone, and closing deals in a target vertical within a limited window. SPIFFs sit on top of the regular plan rather than replacing it.

Draws Against Commission

An advance paid against future commissions, common for new hires still ramping up. A draw can be recoverable (deducted from future earnings) and non-recoverable (a guaranteed minimum that isn’t clawed back).

Sample Sales Compensation Plan

A straightforward example for a mid-market account executive:

Component	Example
Base salary	$75,000
Target variable	$75,000
OTE	$150,000
Annual quota	$750,000
Commission rate	10% up to quota
Accelerator	15% above 100% quota
Payout frequency	Monthly, with quarterly true-up
SPIFF	$1,000 per new-logo deal in target industry (Q4)

This structure rewards steady quota attainment while giving top performers a real incentive to keep closing once they’ve hit their number, and the SPIFF adds short-term focus without altering the core plan.

Sales Compensation Plan Template

Use this as a starting checklist when documenting a plan for any role:

Role:

Base Salary:

Target Variable:

OTE:

Quota:

Commission Metric (revenue, ACV, profit, units):

Commission Rate:

Accelerator (threshold + rate):

Decelerator (threshold + rate):

Bonus:

SPIFF:

Payout Frequency:

Quota Period:

Eligibility Rules:

Clawback Rules:

Ramp Period (for new hires):

Filling in every field before a plan goes live is what prevents disputes later over what counts, when it’s paid, and what happens if a deal falls through after commission is paid out.

Sales Manager Compensation Plan

Manager compensation works differently from rep compensation because managers aren’t credited with individual sales  they’re paid on the performance of their entire team. Two structures are common:

Commission override: The manager earns a smaller commission percentage on every deal closed by their team, often with an accelerator once the team collectively crosses 100% of its quota. The exact override percentage depends on the company’s compensation philosophy, team size, and revenue model, so it varies more than a single benchmark can capture. Many plans also include a “cliff”  , a minimum team attainment (commonly around 50%) below which the manager earns no override at all, which keeps the payout tied to real team performance rather than a handful of individual deals.

Team bonus: Instead of a per-deal override, the manager earns a set bonus amount for each percentage point of team quota attainment, similar to a tiered bonus plan but scaled to the team’s collective number rather than any one rep’s results.

A sample structure: a manager with a $100,000 base and $100,000 OTE at a 50/50 split, overseeing a team with a combined $3.6 million annual quota, earning an override on team revenue below 100% attainment and a higher override above it, with no override paid if the team falls below the plan’s cliff for the period.

How to Build a Sales Compensation Plan

1. Define the sales role. Clarify what the rep actually controls  net-new logos, expansion, renewals, and a mix  since that determines what the plan should measure.
2. Set OTE. Benchmark against market rate for the role and location, within budget.
3. Choose the base/variable split. Match it to sales cycle length and how directly the rep controls outcomes.
4. Set the quota. Base it on territory, pipeline capacity, and realistic historical attainment, not just a top-down revenue target.
5. Choose the commission metric. Decide whether commission is paid on revenue, gross profit, ACV, bookings, and another metric.
6. Set commission rates. Back into a rate that pays target variable compensation when the rep hits 100% of quota.
7. Add accelerators, decelerators, and bonuses. Layer these in deliberately to reward the specific behaviors that matter most.
8. Define payout rules. Set frequency, eligibility, and clawback conditions in writing.
9. Model different attainment scenarios. Run the numbers at 50%, 75%, 100%, and 125%+ attainment to check the plan behaves as intended at every level.
10. Document and communicate the plan. Put it in writing, walk the team through it before the performance period starts, and revisit it on a regular cycle.

How to Choose the Right Sales Compensation Model

The right plan depends on sales cycle length, deal complexity, and how much control an individual rep has over the outcome. Short, transactional sales cycles support heavier commission weighting because results are visible quickly. Long, complex, multi-stakeholder deals need a higher base to keep reps stable through slower quarters. Whatever the split, the plan should be reviewed on a regular cycle; most companies revisit compensation plans annually and when quotas, territories, and headcount change significantly  since a plan that fit last year’s team doesn’t automatically fit this year’s.

Sales Compensation Calculator

Use the calculator below to estimate total compensation, quota attainment, and effective commission rate for a given base salary, quota, and commission structure. Enter a base salary, annual quota, revenue closed, commission rate, and  if the plan includes one  an accelerator threshold and rate.

FAQ

What is a good sales compensation structure? There’s no single “good” structure; it depends on the role. Inside sales and SDR roles typically lean 60/40 and 70/30 toward base salary, while account executive roles commonly use a 50/50 base-to-variable split, since AEs have more direct control over closing revenue.

What is OTE in sales compensation? OTE, and on-target earnings, is the total pay a salesperson would receive if they hit 100% of their quota  base salary plus the full target variable component. It represents expected earnings at target performance, not a guaranteed income and a cap on what a rep can make.

How is sales commission usually calculated? The most common formula is commission rate multiplied by eligible sales. Many plans add tiers and accelerators, so the rate itself can increase once a rep passes a certain revenue and quota threshold, and the “eligible sales” metric can be revenue, profit, ACV, and another measure entirely.

What’s the difference between a bonus and a commission? Commission is ongoing variable pay tied directly to a quota and revenue formula. A bonus, including SPIFFs, is typically a one-time and short-term payout for hitting a specific milestone and behavior, layered on top of the base compensation plan rather than replacing it.

How does sales manager compensation differ from a sales rep’s plan? A rep’s plan pays on their individual deals; a manager’s plan pays on team performance, usually through a smaller commission override on all team revenue and a bonus tied to the team’s overall quota attainment, often with a minimum attainment threshold before any payout applies.

What are the main types of sales compensation plans? The most common types are straight salary (no variable pay), straight commission (no base), base plus commission, base plus bonus, tiered commission, and commission with accelerators and draws layered on top. Most B2B sales roles use some form of base plus commission.

What is a 50/50 sales compensation plan? A 50/50 plan means half of a rep’s OTE comes from guaranteed base salary and half comes from target variable pay at 100% quota attainment. It’s a common structure for account executives because it balances income stability with a strong incentive to close.

What is the difference between OTE and base salary? Base salary is the fixed, guaranteed portion of pay regardless of performance. OTE is the total expected pay  base salary plus target variable compensation  if the rep hits 100% of quota. Base salary is one component of OTE, not a separate figure from it.

How often should a sales compensation plan be reviewed? Most organizations review compensation plans at least annually, and additionally whenever quotas, territories, product pricing, and team size change enough to make the existing plan misaligned with current selling conditions.