Sample Sales Compensation Plan Commission Structure

Sample_Documents

DISCLAIMER: This is a sample template provided for informational purposes only. It does not constitute legal, tax, or financial advice. Organizations should consult their own legal and tax advisors and tailor this document to reflect their specific business needs, geographies, and applicable laws.

Sales Compensation Plan & Commission Structure

Company: <Company Name>

Document Type: Sales Compensation Plan & Commission Structure

Category: Variable Compensation

Field	Value
Plan Name	<Company Name> Sales Compensation Plan
Plan Year	<Plan Year> (e.g., <Date> to <Date>)
Version	<Version Number>
Effective Date	<Effective Date>
Next Review Date	<Next Review Date>
Document Owner	<Owner Title/Function> (e.g., Total Rewards)
Plan Sponsor	<Executive Sponsor> (e.g., Chief Revenue Officer)
Approved By	<Approver Name/Title>
Approval Date	<Approval Date>
Geographies Covered	<Country/Region List>
Currency	<Currency> (e.g., <USD/EUR/GBP>)
Document ID	<Document ID>
Confidentiality	Confidential – Internal Use Only

Purpose and Objectives

Define a consistent, fair, and motivating variable compensation framework aligned with <Company Name>’s go-to-market strategy and financial objectives.
Drive focus on strategic priorities including <Strategic Goal 1>, <Strategic Goal 2>, and <Strategic Goal 3>.
Differentiate rewards based on measurable performance while ensuring fiscal discipline and compliance.
Provide clear governance, accountabilities, and operational guidelines to minimize disputes and administrative burden.

Scope and Applicability

In Scope

All sales roles eligible for variable compensation within <Company Name> in <Country/Region List>.
Direct, channel, and overlay roles as defined in the Eligible Roles section.
Commissions, bonuses, SPIFFs, MBOs, draws, and guarantees covered by this plan.
Deals booked under <Company Name> contracting entities in <Country> and additional entities listed in <Annex/Appendix>.

Out of Scope

Non-sales incentive plans (e.g., corporate bonus plans for non-sales functions).
Equity compensation (e.g., RSUs, stock options).
Retention bonuses, spot awards outside the plan, or any ad hoc incentives not expressly authorized under this document.
Commission arrangements for contractors engaged via <Vendor Name> or other third parties unless specifically referenced.

Eligibility Criteria

Employees in regular full-time or part-time status occupying eligible roles as of the Effective Date.
Temporary employees, interns, and contractors are not eligible unless approved by the Plan Sponsor in writing.
Employees on performance improvement plans may be subject to restrictions or deferrals per the Performance Management Policy.

Plan Overview

Plan Philosophy

Maintain market-competitive total cash compensation with a pay mix that balances base pay stability and at-risk variable pay.
Align incentives with profitable growth, customer value, and ethical selling.
Keep plans simple, measurable, and within a manageable number of components (typically 1 to 3).

Plan Year, Effective Dates, and Review Cycle

Plan Year: <Date> to <Date>.
Mid-Year Review: Conducted by <Month>, limited to material business changes (e.g., product launches, pricing changes).
Annual Review: Conducted in <Month> to align with budgeting and quota-setting timelines.
Changes take effect on <Effective Date> unless otherwise specified and communicated.

Plan Currency and Markets

Base currency is <Currency>; local payroll may convert using the monthly average FX rate published by <Source Name>.
For multi-currency deals, conversion occurs at the booking month average rate.
Local variations may be implemented to comply with local laws in <Country> and must be documented in country addenda.

Roles and Target Compensation

Eligible Roles

Account Executive (AE) – New Business
Account Manager (AM) – Renewals and Expansion
Sales Development Representative (SDR)
Channel Account Manager (CAM)
Solutions Specialist / Overlay
Sales Manager (First-Line)
Regional Sales Director (RSD)

Pay Mix and On-Target Earnings (OTE)

AE: 50/50 pay mix (50 percent base, 50 percent variable) with OTE of <Amount>.
AM: 60/40 pay mix with OTE of <Amount>.
SDR: 70/30 pay mix with OTE of <Amount>.
CAM: 60/40 pay mix with OTE of <Amount>.
Overlay: 70/30 pay mix with OTE of <Amount>.
Sales Manager: 70/30 pay mix with OTE of <Amount>, including team override per the Manager Overrides section.

Quota Setting and Territories

Quotas are set annually in collaboration among Sales Leadership, Finance, and Sales Operations considering pipeline, territory potential, historical performance, and strategic initiatives.
Territory assignments are documented by <Date> and remain in effect unless formally changed.
Quotas may be prorated for new hires, leaves, or mid-year territory changes.
Quota relief is considered for material corporate-driven changes (e.g., price increases, ICP shifts) upon Plan Sponsor approval.
Quotas are communicated to employees in writing and acknowledged via <System Name>.

Commission Structure

Component Design

Plans are limited to a primary component (e.g., Annual Contract Value) and, where appropriate, one or two secondary components (e.g., Strategic Product Mix, Multi-Year Uplift, or MBOs).
Each component has a measurable definition, crediting rules, a weighting, and a rate schedule.

Definitions

ACV (Annual Contract Value): The annualized contract value excluding one-time fees and taxes.
TCV (Total Contract Value): Total contracted value over the initial term.
ARR (Annual Recurring Revenue): Recurring revenue run-rate at contract start.
Bookings: Executed order form countersigned by <Company Name> or recorded in <System of Record> subject to approval workflow.
Revenue: GAAP/IFRS recognized revenue as recorded by Finance.
New vs Renewal vs Expansion: New is first-time purchase by a legal entity, Renewal is continuation without lapse beyond <Number> days, Expansion is incremental value added to an active subscription.

Booking vs. Revenue Credit

AE plans are measured on Bookings (ACV basis) to emphasize new logo acquisition and sales velocity.
AM plans are measured on Renewal ACV or ARR, with uplift for expansion.
In markets with long deployment cycles, finance may approve Revenue-based crediting to align with revenue recognition.

Multi-Year Deals and Timing

Multi-year contracts booked in period credit at 1x annual ACV unless otherwise specified.
Uplift for multi-year deals may be recognized as an additional percentage of year-1 ACV (e.g., +<Percentage> for 3-year terms).
Early renewals credited when booked if renewal date is within <Number> months of current expiration; otherwise, credited at renewal date.

Credit Rules

Credit follows the named account owner as of the opportunity’s stage <Stage Number> to <Stage Number> in <CRM System> at the time of booking.
Split credit must be documented with percentages agreed by the AE/AM and approved by Sales Management and Sales Operations.
SDRs receive credit for qualified opportunities accepted and pipeline converted to closed-won within <Number> days.
Channel deals: CAM receives credit based on partner-sourced classification in <CRM System> and verified partner registration.
Overlay roles receive credit on designated product family bookings at <Percentage> of ACV per approved overlay matrix.

Rate Structure and Accelerators

Primary component rates are tiered by attainment to quota to reward overperformance.
Example AE New ACV rate schedule (example values for illustration; customize per <Company Name>):

Attainment Range (% of Quota)	Commission Rate (% of ACV)	Accelerator Multiplier
0% to 49.9%	0.0%	0.0x
50% to 79.9%	4.0%	1.0x
80% to 99.9%	6.0%	1.0x
100% to 119.9%	8.0%	1.2x
120% to 149.9%	10.0%	1.5x
150% and above	12.0%	2.0x

AM Renewal component rate: <Percentage> of Renewal ACV with expansion differential of +<Percentage> for incremental ARR.
Strategic Product Mix kicker: +<Percentage> rate on designated products per <Product List>.
Accelerators apply prospectively within the plan year unless otherwise specified.

Thresholds, Caps, and Floors

Thresholds ensure minimum performance standards before commissions accrue.
Standard threshold: 50% of quota for AEs, 80% renewal rate for AMs.
No caps for commissions unless required by local law; fiscal guardrails may be implemented with executive approval.
Minimum deal size floor of <Amount> ACV to be commissionable unless explicitly waived.

SPIFFs and MBOs

SPIFFs are short-term incentives for specific behaviors (e.g., pipeline generation in <Quarter>). All SPIFFs must include a written brief with objectives, eligibility, measurement, timing, and budget, approved by the Plan Sponsor.
MBOs may constitute up to <Percentage> of variable pay for roles where output-based metrics are appropriate (e.g., SDR, Overlay). MBOs must be SMART and documented in <System Name>.

Draws and Guarantees

Recoverable Draw: Advance against future commissions, recoverable from earnings over <Number> pay periods.
Non-Recoverable Draw: Guaranteed minimum for a defined period (e.g., new hire ramp), not recouped if earnings are lower.
New hire ramp draw schedule for AEs (example):
- Months 1-2: Non-recoverable draw of <Amount> per month.
- Months 3-4: Recoverable draw of <Amount> per month.
- Month 5 onward: No draw; standard plan applies.
Any draw requires written approval from Sales Leadership and Finance.

Manager Overrides and Overlays

First-line Sales Managers receive an override of <Percentage> on team primary component bookings, based on team attainment and subject to threshold of <Percentage> team quota.
Overrides do not apply to deals where the manager is the primary seller.
Overlay specialists earn <Percentage> on designated product ACV; splits align with the Split Credit policy.

Channel and Partner Sales

Partner-sourced deals: CAMs receive <Percentage> of ACV; AEs receive <Percentage> depending on sales motion (partner-led vs co-sell).
Registered deals honor partner protections for <Number> days as captured in <Partner Portal>.
Margin-based products may use a gross-margin crediting model with rates applied to partner margin dollars.

Performance Measurement

Measurement Periods and Frequency

Primary measurement is monthly for credit and payout; accelerators assessed on quarter-to-date and year-to-date attainment.
Performance lock dates occur on the <Number> business day following month-end.

Data Sources

CRM of record: <CRM System> for opportunity, product, and ownership data.
Finance system: <ERP/Finance System> for revenue recognition, billing, and collections.
Data warehouse: <BI Tool> for reporting and reconciliation.
Commission system: <ICM Tool> for calculation, statements, and dispute workflow.

Returns, Cancellations, and Clawbacks

Commission reversals apply for customer cancellations, non-payment beyond <Number> days, or material downgrades within <Number> days of booking.
Chargeback amounts are netted from current or future payouts; if employment ends, <Company Name> may deduct amounts consistent with local law.
For refunds due to compliance breaches or misrepresentation, commissions are fully clawed back.

Compliance, Ethics, and Deal Governance

Commissions are payable only for deals compliant with <Company Name>’s Code of Conduct, Anti-Bribery, and Trade Compliance policies.
Deals requiring non-standard terms, deep discounts beyond <Percentage> off list, or custom commitments must follow the Deal Desk process and obtain documented approvals.
<Company Name> reserves the right to audit deals and adjust crediting for non-compliant transactions.

Payout and Payroll Processing

Payout Frequency and Schedule

Payouts occur monthly, on the <Nth> regular payroll following month-end close (e.g., paid on the <Date> payroll for prior month performance).
Quarterly true-up processes reconcile accelerators and threshold achievements.

Taxes, Withholding, and Deductions

All payouts are subject to applicable taxes, social charges, and withholdings as required by law in <Country>.
Overpayments or adjustments may be deducted from future payouts consistent with local regulations and employment agreements.

Currency and FX Handling

If credit currency differs from payroll currency, <Company Name> applies the monthly average FX rate from <Source Name> for the performance month.
FX rates are published to participants in <System Name> at the time of statement release.

Examples of Earnings Calculation

Example AE monthly calculation (illustrative):
- Quota: <Amount> ACV per month
- Booked ACV: <Amount>
- Attainment: <Percentage> of monthly quota
- Applicable tier rate: <Percentage>
- Commission: Booked ACV x Rate = <Amount>
- Accelerator: If quarter-to-date attainment ≥ 120%, apply 1.5x multiplier to current month commission over 100% attainment
- SPIFF: <Amount> for strategic product wins
- Total Earnings: Commission + Accelerator + SPIFF = <Amount> (before taxes)
Example AM quarterly calculation (illustrative):
- Renewal base: <Amount> ARR
- Renewal achieved: <Amount> ARR (renewal rate <Percentage>)
- Expansion: <Amount> ARR at expansion rate of <Percentage>
- Total Commission: (Renewal ARR x Renewal Rate) + (Expansion ARR x Expansion Rate)

Employment Events and Changes

New Hires and Ramps

Eligibility begins on the later of the hire date or Plan launch date, prorated by days in plan.
New hires receive ramped quotas for <Number> months per role-specific ramp schedule.
Training and certification milestones may be required before full plan activation.

Promotions, Transfers, and Leaves

Promotions mid-period result in prorated quotas and OTE based on days in each role.
Transfers between territories adjust quotas based on remaining potential; credit follows the pre-transfer owner unless Sales Ops approves a split.
Paid leaves: Quotas and targets prorated to leave duration; unpaid leaves: Earnings pause and quotas reduced accordingly, subject to local law.

Terminations and Garden Leave

Voluntary resignation: Eligibility for commissions on deals booked prior to last working day; no eligibility post-termination unless required by local law or written agreement.
Involuntary termination not for cause: Commissions paid on approved deals booked prior to termination according to plan timelines.
Termination for cause: Commissions may be forfeited subject to local law and policy.
Garden leave: No new credits accrue during garden leave unless otherwise required by local law.

Exceptions and Dispute Resolution

Exceptions must be submitted in <ICM Tool> or via <Form Name> within <Number> days of statement release and include a clear business justification.
Dispute resolution hierarchy:

Sales Operations initial review
Finance validation
Final decision by Plan Sponsor

Decisions are final for the period and documented for audit.

Roles and Responsibilities

Sales Leadership: Set strategy, approve quotas, sponsor plan, and ensure regional compliance.
Total Rewards: Design plan architecture, market benchmarking, pay mix, governance, and documentation.
Finance: Budget validation, accruals, revenue recognition alignment, and financial controls.
Sales Operations: Territory design, quota calculation, CRM data hygiene standards, crediting, and ICM administration.
Legal/Compliance: Policy review, contract terms, anti-bribery and trade compliance.
Payroll/HR Operations: Payroll processing, taxes, data integration, and employee support.
IT/Data: System integrations, data quality monitoring, access controls, and issue resolution.
People Managers: Communicate plans, coach on performance, approve split credits and MBOs.
Participants: Understand plan, maintain CRM hygiene, adhere to policies, and review statements.

Systems and Controls

Systems Landscape

CRM: <CRM System> for opportunity lifecycle and attribution.
ICM: <ICM Tool> for calculation and statements.
ERP: <Finance System> for billing and revenue data.
HRIS: <HRIS System> for eligibility, job data, and effective dates.
BI: <Analytics Tool> for dashboards and reconciliations.

Controls and Audits

Monthly reconciliation between CRM bookings and ERP revenue by Sales Ops and Finance.
Quarterly random audit of deals against approval artifacts (pricing, discount, legal exceptions).
Access control reviews semi-annually for ICM and CRM roles.
Retention of plan documents, approvals, and statements for <Number> years.

Implementation Guidelines

Confirm plan objectives, measures, and pay mix with Plan Sponsor and Finance.
Finalize role eligibility, territories, and quotas; document in <Territory File>.
Configure measures, credit rules, tiers, and accelerators in <ICM Tool>.
Load participant records and eligibility from <HRIS System> with effective dates.
Establish data integrations and validation checks between CRM, ERP, and ICM.
Create sample statements and run parallel calculations for at least <Number> cycles.
Train managers and participants; publish plan documents in <System Name>.
Launch with clear timeline for first payout and lock dates; monitor and triage issues.
Conduct post-launch review after first payout; adjust minor defects with documented approvals.

Review and Approval Process

Draft plan by Total Rewards with input from Sales, Finance, and Legal.
Financial modeling and affordability checks by Finance; scenario analysis for risk.
Legal and compliance review for policy alignment and local law adjustments.
Executive approval by CRO, CFO, and CHRO (or delegates).
Publication in <System Name> and acknowledgment collection from participants.
Annual effectiveness review with KPI scorecard (e.g., cost of sales, attainment distribution, turnover, dispute rates).

Legal Notices and Disclaimers

This plan does not create a contract for employment and does not alter the at-will nature of employment where applicable.
<Company Name> may amend, suspend, or terminate this plan at any time, with or without notice, subject to local legal requirements. Material changes will be communicated in writing.
Participants must comply with all applicable laws and company policies, including Anti-Bribery, Anti-Corruption, Trade Compliance, Competition Law, and Code of Conduct. Violations may result in forfeiture or clawback of incentives and disciplinary action.
Any conflicts between this plan and local laws or collective agreements will be resolved in favor of applicable legal requirements; local addenda will document such variations.
In the event of a force majeure or extraordinary business event (e.g., pandemic, natural disaster, sanctions), <Company Name> may adjust quotas, crediting, or payment timing as reasonably necessary.
Right to offset and recover: <Company Name> may offset overpayments against future payouts, subject to legal limitations and required consents.

Policy Interactions

This plan should be read in conjunction with:
- Sales Policies and Procedures
- Price and Discount Policy
- Travel and Expense Policy
- Code of Conduct
- Leave of Absence Policy
- Data Privacy Policy
- Record Retention Policy

Risk Management and Guardrails

Concentration risk: Deals above <Amount> ACV require executive sign-off; mega deal bonuses capped or separately negotiated.
Discount guardrail: Margins below <Percentage> require CFO approval to remain commissionable.
Credit hygiene: Opportunities must be kept current in <CRM System> with accurate stages and products to qualify for credit.

Country or Business Unit Addenda

Local variations, statutory requirements, and payout practices for <Country> or <Business Unit> should be documented here and approved by Legal and Total Rewards.

Sample Plan Summary by Role

Role	Measure(s)	Weighting	Threshold	Rate/Tiers	Notes
AE (New Business)	New ACV (Bookings)	100%	50% of quota	See tier table	Accelerators above 100% attainment
AM (Renewal)	Renewal ACV; Expansion ARR	70% Renewal / 30% Expansion	80% renewal rate	Renewal <Percentage>, Expansion +<Percentage>	Downgrade chargebacks apply
SDR	Qualified Opportunities Accepted	100%	<Number> per month	<Amount> per accepted SQL	Conversion window <Number> days
CAM	Partner-Sourced ACV	100%	<Amount> per quarter	<Percentage> of ACV	Registered deals only
Overlay	Strategic Product ACV	100%	<Amount>	<Percentage> of ACV	Split credit matrix
Sales Manager	Team Attainment Override	100%	90% team attainment	<Percentage> override	No self-deal override

Data Governance and Quality Standards

CRM required fields: account, product, term, ACV, close date, stage, owner, partner flag, approvals.
Reconciliation tolerance: Variance of ≤ <Percentage> between CRM and ERP requires resolution prior to payout.
Data correction cut-off: <Number> business days after month-end; changes after cut-off apply to next cycle.

Audit Trail and Documentation

Maintain plan acknowledgments, quota letters, split credit approvals, SPIFF briefs, and exception decisions in <Repository Name>.
Statement versions retained each cycle for <Number> years; audit logs preserved per Record Retention Policy.

Change Management

Version control managed by Total Rewards; all updates receive a new version number and redline summary.
Stakeholder communication plan includes training materials, FAQs, and office hours during the first two payout cycles.

Frequently Asked Operational Questions (for Administrators)

How are mid-quarter territory changes handled?
- Pro-rate quotas and apply split credit from effective date; document in <Change Log>.
What if a deal is booked without required approvals?
- Hold credit until approvals are obtained; if not obtained within <Number> days, reverse credit.
How are credit disputes with partners resolved?
- Follow the Partner Operations SLA; escalate to CAM Manager and Legal if unresolved within <Number> days.

Glossary

Accelerator: Increased commission rate applied after reaching a specified attainment level.
Attainment: Actual performance as a percentage of quota.
Chargeback: Negative commission entry reversing prior credit.
Commission Rate: Percentage applied to a creditable base to determine earnings.
Draw: Advance on commissions, recoverable or non-recoverable.
ICM: Incentive Compensation Management system.
MBO: Management by Objectives, goal-based incentive component.
Override: Commission earned by a manager on team performance.
Quota: Target performance level for a given period.
SPIFF: Short-term incentive to promote specific behaviors.
TCV/ACV/ARR: Contract value metrics defined in Plan Overview.

Document Control

Owner: <Owner Name/Title>
Version History:

Version <Number> – <Date> – Initial release
Version <Number> – <Date> – Updated tiers and accelerators
Version <Number> – <Date> – Added country addendum for <Country>

Acknowledgment

Participants must acknowledge receipt and understanding of the plan in <System Name> by <Date>. Lack of acknowledgment does not negate plan applicability.

Communication to Employees and Managers

Audience: Sales employees, first-line managers, and eligible stakeholders

Message from <Company Name> Sales Leadership

Welcome to the <Plan Year> Sales Compensation Plan. Our goal is to reward your impact on our customers and our growth in a way that is clear, fair, and predictable. Below is a practical guide to how your plan works this year and what you can expect at each step.

Your plan is built around a simple idea: when you win the right deals the right way, you earn more. For most of you, that means a clear focus on annual contract value and strategic products that matter most to our customers. If you manage renewals, your plan emphasizes customer retention and expansion. If you support partners, your plan rewards partner-sourced success.

Here is what you need to know to get started:

Your quota and territory will arrive in your inbox via <System Name> by <Date>. Review your assignment and raise any questions within <Number> business days.
Your on-target earnings are split between base pay and variable pay. When you hit 100 percent of quota, you earn 100 percent of your variable target. When you exceed 100 percent, accelerators increase your rate so you can earn more.
We pay monthly, typically on the <Nth> payroll after the month closes. You will see a detailed statement in <ICM Tool> that shows exactly how your payout was calculated.
Keep your opportunities current in <CRM System>. Accurate stages, products, ACV, and close dates are essential. If data is missing or approvals are not in place, we may delay or adjust credit.
For large or complex deals, use the Deal Desk. We want you to win competitively, and we also need to protect healthy margins and terms. If a deal falls below our margin or discount guardrails, it may affect commissionability until approved.
If you are new to <Company Name>, your plan includes a ramp. You will receive a draw during your first months so you can focus on building pipeline. Your manager will walk you through the ramp schedule and expectations.
If a customer cancels, does not pay, or downgrades significantly within the early life of a contract, we may reverse commissions for that portion of the deal. We will always show reversals clearly on your statement.
We care deeply about how we sell. Deals must comply with our Code of Conduct, Anti-Bribery, and Trade Compliance policies. If a deal violates policy, we will not pay commissions and may claw back amounts already paid.
SPIFFs and short-term contests appear throughout the year to highlight priorities. Each SPIFF will come with a simple brief: what counts, how much it pays, who is eligible, and when it pays.
If you believe there is an error in your statement, submit a dispute in <ICM Tool> within <Number> days. The sooner you raise it, the faster we can resolve it.

As your manager, here is how you can support your team:

Forecast and coach weekly. Early coaching on deal quality often matters more than late-stage heroics.
Approve split credits and MBOs promptly in <System Name>. Delays lead to payment delays.
Celebrate the right wins. Multi-year, strategic product deals with healthy margins are good for customers and for your team’s earnings.
Partner with Sales Ops and Finance when territory or quota issues arise. Document changes and keep your team informed.

A few examples to bring it to life:

If you are an AE with a monthly quota of <Amount> ACV and you book <Amount> this month, you are at <Percentage> of goal. You earn at the corresponding tier rate. If your quarter-to-date performance is above 120 percent, the accelerator increases your current month’s eligible commission.
If you are an AM who renews <Amount> ARR at <Percentage> renewal and adds <Amount> in expansion, you earn the renewal rate on the base and the higher expansion rate on the uplift.

Your success is our success. When you win the right way, customers stay longer, buy more, and advocate for us. Thank you for your focus, your integrity, and your dedication to our mission. If you have questions after reviewing your plan letter, talk with your manager or visit the Sales Compensation hub in <System Name> for FAQs and office hours.

Let’s have a great <Plan Year> together.

Document Information:

Document Type: Sales Compensation Plan & Commission Structure
Category: Variable Compensation
Generated: August 24, 2025
Status: Sample Template
Next Review: <Insert Review Date>

Usage Instructions:

Replace all text in angle brackets < > with your company-specific information
Review all sections for applicability to your organization
Customize content to reflect your company's policies and local regulations
Have legal and HR leadership review before implementation
Update document header with your company's version control information
At bottom of the document you find a short example on how the content could be communicated to end-users, for instance employees.

This sample document is provided for reference only and should be customized to meet your organization's specific needs and local legal requirements.