What Are the Most Effective Examples of Sales Commission Structures for Employers?

Understanding the Purpose of Sales Commission Structures and Why They Matter

Sales commission structures serve as the backbone of sales compensation plans for organizations seeking high performance and sustainable revenue growth. For employers, understanding and implementing the right commission structure can mean the difference between recruiting an average sales team and building a powerhouse of motivated sales professionals. Whether you’re restructuring an underperforming sales department or scaling a startup’s first dedicated team, evaluating the most effective examples of sales commission structures empowers leadership to attract, incentivize, and retain top-tier talent.

Sales organizations today contend with a rapidly changing landscape, technology adoption, evolving buyer expectations, and economic volatility all impact how compensation packages should be designed. The most successful employers don’t leave commission plans to chance or legacy rituals; they prioritize sales compensation assessment and keep a detailed finger on the pulse of what drives their team. Compensation must be competitive, transparent, and tailored to your business goals and growth stage.

Consider a scenario: An emerging SaaS company realized that despite generous base salaries, turnover among account executives remained high. A comprehensive review revealed lack of clarity and perceived fairness in their sales commission plans. By benchmarking their approach against industry best practices and introducing a tiered commission structure, employee retention and quotas achieved both improved, demonstrating that the stakes aren’t just about pay, but about trust and alignment as well.

Ready to see how you can transform your sales compensation plan and build a magnetic team culture? Book an introductory meeting to discuss your recruiting strategy and compensation options.

Classic Sales Commission Structures: Pros, Cons, and When to Use Each

Employers have several structural “building blocks” to choose from when developing their unique sales compensation plan. Selecting the right approach hinges on your company’s industry, business model, sales cycle, and revenue objectives. Below, we examine four widely used examples of sales commission structures, exploring the benefits and limitations each presents.

1. Straight Commission

This pure-play model is as straightforward as it sounds: salespeople receive compensation solely based on the revenue they generate, with no base salary. If a representative closes $500,000 in new business and the commission rate is 10%, they earn $50,000. This approach is common in industries where deal sizes are high and sales cycles are lengthy, such as real estate or some B2B verticals.

Benefits:

• High motivation for “hunters” who excel in independent, results-driven roles.
• Aligns cost-to-company directly with earned revenue.
• Lower overhead during periods of low sales.

Challenges:

• Can create income instability, jeopardizing tenure and team morale.
• May not suit longer sales cycles or nuanced consultative sales environments.
• Can result in aggressive pursuit of deals at the expense of relationship building.

2. Salary Plus Commission

The most popular and flexible structure among U.S. sales teams, this model provides a fixed base salary with an additional incentive through commissions. The split between fixed and variable is often 50/50 or 60/40, depending on role and industry.

Benefits:

• Balances security with performance-based upside.
• Attracts a broader talent pool, notably in SaaS, healthcare, and tech verticals.
• Reduces “income anxiety” and can foster focus on longer-term account growth.

Challenges:

• Variable pay may account for a smaller overall percentage, reducing maximum earning potential.
• Less direct alignment of total earnings with output, possibly inviting complacency if quotas are misaligned.

3. Tiered Commission Structure

Tiered commission plans reward over-performance by increasing commission rates once sales reps exceed set targets. For example, 5% commission on the first $100,000, 7% on the next $50,000, and 10% on everything above $150,000.

Benefits:

• Strong incentives for exceeding targets, driving consistent overachievers.
• Helps organizations raise average performance and achieve stretch goals.
• Facilitates retention of top revenue producers by making extraordinary earnings possible.

Challenges:

• Can increase compensation complexity, requiring clear communication and regular sales compensation assessments.
• May not suit roles with lower perceived earning potential or fixed quotas.

4. Gross Margin Commission

Instead of rewarding revenue alone, this model pays commissions based on the profit margin from each closed deal. If an account’s gross profit margin is 20% on a $100,000 deal, and the commission rate is 25% of the margin, the rep earns $5,000.

Benefits:

• Encourages strategic selling, focusing on profitable deals, not volume alone.
• Useful for industries where discounts are common or costs of goods sold vary widely.

Challenges:

• May require more detailed tracking and transparency around deal economics.
• Can feel less “straightforward” to reps used to revenue-based systems.

Clear understanding of these sales commission plans and their fit for your business maturity, market, and product is essential before launching or revising your approach. Remember, there’s no universal “right answer”, each structure can be adapted, mixed, or tailored to meet evolving business demands.

Innovative Sales Commission Structures for Modern Teams

As workforce expectations evolve and organizations gain access to enhanced analytics, employers increasingly seek forward-thinking approaches to sales compensation. Beyond classic models, several innovative structures now feature in modern sales organizations determined to retain top talent and outperform growth targets.

1. Commission Draws

A draw is an advance payment against future commissions, providing income stability while supporting on-boarding or volatile sales cycles. Employers can structure draws as recoverable (the advance is subtracted from earnings) or non-recoverable (extra payment, regardless of commissions earned). This setup can help early-career sales hires or those building a nascent sales territory.

Example:

A software sales rep receives a $2,500 monthly draw. In a slower quarter, their commissions total $2,000, meaning $500 is carried forward (‘recoverable’). Next month, they earn $3,500, repaying the previous shortage and getting $1,000 net above the draw.

2. Team-Based Commission Structures

This model aligns the entire team’s compensation to shared goals, whether it’s revenue, customer retention, or product launches. Such plans are powerful for complex or consultative sales processes, think enterprise SaaS or healthcare solutions, where deals require input from several contributors.

Example:

A five-person sales team has a shared quarterly quota. Commission payouts are based on the team’s combined performance, encouraging peer coaching, resource sharing, and reduced internal rivalry.

3. Milestone or Activity-Based Incentives

Recognizing that sales roles now involve a spectrum of activities (pipeline development, product demos, onboarding), some employers reward individuals not just for closed deals, but for key milestones. Such incentives can be awarded for booking qualified meetings, securing demo attendances, or upselling existing accounts, especially valuable for emerging sales talent.

Example:

A B2B SaaS company might pay a lump sum for each closed pilot project and an additional bonus for successfully converting a pilot into a long-term contract.

4. Revenue Acceleration Bonuses

To motivate teams to outperform during demanding growth phases, many companies introduce short-term “accelerators.” Once a rep reaches quota, a higher commission or a bonus “kicks in” for additional deals above the standard target. This strategy fuels urgency and exceptional results during critical periods (e.g., new market launches, end-of-year pushing).

5. Territory Volume Plans

Best for established companies, this model focuses on growing an assigned book of business or geographic territory. Commissions are tied to the total volume achieved, enabling reps to be more strategic about customer success and expansion, rather than solely hunting new logos.

Delving into these innovative examples of sales commission structures, thoughtful employers realize that a modern compensation plan is as much about engagement and fairness as it is about financial reward. You can explore more real-world compensation solutions through our sales compensation assessment resource.

Seeking expert guidance on which plan could best fit your unique business and team? Book an introductory meeting to tailor your sales recruiting and compensation strategy to your growth goals.

Real-World Case Studies: How Companies Build Effective Sales Compensation Plans

Looking at true-to-life examples gives employers deeper insight than theory alone. The following case studies showcase how businesses have re-engineered their sales commission plans to thrive in real competitive environments.

Case Study 1: From Flat Quotas to Tiered Incentives in a SaaS Startup

A SaaS company specializing in enterprise workflow tools struggled with sales turnover after a year of underwhelming results. Initial compensation offered a base salary with a flat 5% commission, a structure that unintentionally capped earnings and demotivated top reps once they reached baseline performance.

Solution: Leadership introduced a tiered commission model:

• 5% for the first $500,000 sold
• 7% on the next $500,000
• 10% over $1 million

Within two quarters, 60% of the sales team exceeded previous records, overall revenue climbed 18%, and staff attrition plummeted. Feedback from regular sales compensation plan reviews also improved trust in leadership, as transparency became the norm.

Case Study 2: Team-Based Commissions Drive Growth at a Healthcare Vendor

A national healthcare technology vendor found its sales teams siloed by region, resulting in duplicated effort and missed cross-selling opportunities. By shifting to a team commission system, paying shared group bonuses when company-wide quarterly targets were met, collaboration flourished. Senior reps led best-practice workshops, junior reps contributed pipeline development, and the entire department saw a 20% increase in close rates year-over-year.

Case Study 3: Gross Margin-Based Plans Empower Strategic Selling

At a manufacturing firm, reps controlled deep discounting, which eroded overall profitability despite high gross sales. The firm switched from revenue commissions to gross margin-based commissions, offering 20% payouts on the profit of each transaction. This change prompted reps to negotiate smarter and focus on valuable deals. As a result, company profits recovered, and cross-functional trust between sales and finance improved substantially.

These cases reinforce the transformative impact of thoughtful sales compensation plan design, proving that there is no “one size fits all,” but rather a path to growth paved with continuous evaluation and adaptation.

For additional employer-oriented insights, visit our executive sales recruiters page to learn how specialized recruiting partners can help you align compensation with next-level talent acquisition.

Common Mistakes and Key Considerations When Designing Commission Structures

Even seasoned business leaders encounter challenges when building or adjusting sales commission plans. Below are several pitfalls and strategic considerations that every employer should weigh:

Mistake 1: Overcomplicating the Commission Plan

An intricate plan with too many tiers, exceptions, or calculation variants erodes the motivational value. If salespeople can’t easily project their earnings, trust and performance both suffer.

Best Practice: Aim for clarity; regularly test your plan by asking a new team member to calculate their own commission on a hypothetical deal. If the answer isn’t prompt and confident, simplify the design.

Mistake 2: Failing to Align with Company Objectives

Your commission plan must promote behaviors that support company growth, not just individual or team volume. For example, if customer retention is a strategic priority, reward renewals or upsell activity, not just new logos.

A 2025 study by Harvard Business Review (“Compensation Plans: What Works, and Why”) found that 73% of high-ROI sales teams tie at least part of commissions to company-wide metrics, not just individual quotas.

Mistake 3: Neglecting Regular Assessment

Compensation should never be “set it and forget it.” Market conditions, company trajectory, and team composition evolve, making scheduled sales compensation assessments essential. Regular feedback sessions, industry benchmarking, and adapting for seasonality prevent your plan from going stale.

Mistake 4: Unintentional Pay Inequity

Inconsistent or unclear plans can lead to pay equity concerns, harming morale and risking reputational damage. Establish uniform, bias-free rules, especially for roles with similar scope or opportunity.

Mistake 5: Ignoring Non-Monetary Motivators

While commission is critical, top sales performers also value recognition, career advancement, and challenging work. Robust compensation should complement, not replace, a supportive culture, professional development, and frequent celebration of success.

Employers who internalize these lessons often notice an uptick in both performance and retention, underlining the symbiotic relationship between fair pay and strong culture. For those ready to audit existing systems or launch a bold new approach, third-party consultation or specialized sales compensation software can deliver fast, reliable results.

Trends and Regulatory Considerations in Sales Compensation for 2025

The U.S. sales compensation landscape continues to shift for employers as new technologies, remote work patterns, and compliance trends reshape best practices.

Pay Transparency Legislation

States like California, New York, and Illinois instituted pay transparency requirements for job postings and promotions in 2025. Employers must now publish salary ranges and commission plans up front, with clear documentation for pay calculations. This move, according to SHRM (2025), leads to enhanced trust, better candidate matches, and fewer costly negotiation breakdowns.

Action Item: Review all commission plan communication and ensure public-facing materials are accurate and legally compliant.

Technology and Automation

Compensation calculation platforms are becoming indispensable. These systems automate commission payout, model “what-if” scenarios, and provide dashboards, minimizing errors, saving time, and supporting data-driven compensation adjustments. According to Gartner (2025), 62% of large firms now use specialized sales compensation technology embedded with analytics and real-time reporting.

Action Item: Invest in platforms that integrate seamlessly with your CRM and HR tech stack, offering transparency for both finance and sales teams.

Diversity and Equity in Compensation

Modern employers must actively pursue diversity in sales hiring and ensure their commission structures are fair and inclusive. Tie-in performance evaluations and non-monetary awards that promote growth for underrepresented groups to create a culture of inclusion and equity.

Gig Economy and Freelance Sales

A rising share of the sales workforce is now contract-based or freelance, requiring flexible pay approaches including project-based commissions, milestone bonuses, and remote-friendly compensation models.

Leaders who monitor these trends and adapt their plans proactively give themselves a strong edge in competing for world-class sales talent.

Frequently Asked Questions About Sales Commission Structures

What is the best example of a sales commission structure for B2B companies?

The ideal commission structure for B2B companies typically combines a base salary with tiered commissions. This setup ensures salespeople remain motivated to close larger deals while maintaining income stability. Tiers reward high achievers, which is critical in longer sales cycles commonly seen in B2B industries.

How often should sales compensation plans be assessed or updated?

Most experts recommend a formal sales compensation assessment at least once a year, along with continuous informal feedback from your sales team. Major shifts in company strategy, product offerings, or market dynamics may warrant more frequent reviews and adjustments.

Are team-based sales commission plans effective?

Team commissions have proven highly effective, especially in complex sales environments requiring collaboration. These plans boost peer support, reduce internal competition, and promote shared accountability. Team-based models are particularly effective in industries like technology and healthcare.

How can employers ensure their sales commission plans are compliant with new pay transparency laws?

Employers must clearly communicate commission ranges and payout methodologies in job postings and offer letters. Documentation should be readily available, accurate, and consistent across all communications. Legal counsel or HR consultants can help ensure compliance with state-level disclosure regulations.

What role does sales technology play in managing commission structures?

Modern sales compensation management platforms automate commission calculations, provide real-time reporting, and offer transparency. These tools minimize disputes, improve administrative efficiency, and support leaders in making data-driven decisions about compensation adjustments and incentives.