Your commission structure determines whether your best field reps stick around or jump ship to a competitor. It’s not just about offering competitive pay—it’s about rewarding the behaviors that drive revenue while keeping top performers hungry for more.
The numbers back this up. According to 2026 salary data, the average field sales representative in the U.S. earns a base salary of $61,200, with total compensation climbing to $88,000-$137,000 when you factor in commissions and bonuses. That variable portion makes up 30-55% of total earnings, which means your commission structure directly impacts whether you attract A-players or settle for mediocrity.
With sales turnover hitting 35%—nearly triple the industry average—getting your commission plan right isn’t optional. The wrong structure burns through talent and kills momentum. The right one turns quota-crushing into a repeatable system.
Quick Reference: 12 Commission Structures at a Glance
In a hurry? Click any structure to jump to detailed examples and guidance.
| Commission Structure | Best For |
|---|---|
| Commission-Only | Contract/seasonal roles with short sales cycles and high earning potential |
| Revenue Commission | Standardized products with focus on market penetration |
| Territory Volume | Collaborative teams sharing geographic responsibilities |
| Gross Margin | Businesses prioritizing profitability over revenue volume |
| Draw Against Commission | New hires ramping up or long sales cycles |
| Tiered Commission | Rewarding top performers who exceed quota |
| Residual Commission | Subscription/recurring revenue business models |
| Multiplier Commission | Complex orgs with multiple KPIs or product lines |
| Base Salary Only | Customer success or support roles with inbound leads |
| Base + Commission | Most B2B field sales with 90-180 day cycles |
| Flat-Rate Commission | High-volume sales with standardized pricing |
| Split Commission | Multi-touch sales requiring cross-team collaboration |
Need Help Running the Numbers?
Use our commission calculator AI prompt library to calculate on-target earnings (OTE), compare plans, and model scenarios instantly –– no spreadsheets required.
Open AI Prompt LibraryWhat Is a Sales Commission Structure?
A sales commission structure defines how reps earn variable pay based on their performance. Most companies use an on-target earnings (OTE) model, which combines a fixed base salary with variable commission that reps earn when they hit their quota.
The base salary covers living expenses and provides stability, while the commission portion rewards results. In field sales, commission typically represents 30-50% of total comp, though this varies by role and industry. SDRs might see a 60/40 base-to-variable split, while seasoned account executives often work on a 50/50 split where half their income depends on closing deals.
Commission structures vary widely depending on your sales cycle, deal size, and business model. A door-to-door solar rep earning straight commission operates differently than a SaaS AE with a base salary plus tiered accelerators. The key is matching your structure to what drives results in your specific market.
Why Commission Structure Matters
Increases Rep Motivation
The right commission plan keeps your team chasing more deals, bigger contracts, and higher close rates. A tiered structure where reps earn 10% on the first $100K in sales but 15% on everything above quota creates urgency that a flat rate never will.
Your best field reps want accelerators. After they hit 100% of quota knocking on doors all month, an extra 2-3% on every deal above quota is what keeps them grinding through rejection. Money talks louder than motivational speeches.
Boosts Team Productivity
When commission accelerates above quota, your field reps start optimizing routes, cutting windshield time, and hitting 12-15 doors a day instead of 8. The right structure makes efficiency worth their effort.
In 2025, companies using pay-for-performance models reported 71% adoption rates, with performance-based comp driving measurable productivity gains. Reps who earn more for exceeding targets find ways to work smarter—better territory planning, faster follow-up, higher conversion rates.
Reduces Turnover Rates
Competitive commission structures help you retain top talent in a market where 35% of sales reps turn over annually. When your best performers can earn $120K-$150K with strong commission plans, they’re less likely to chase opportunities elsewhere.
Retention isn’t just about total comp—it’s about transparency and fairness. Reps who understand exactly how they’re paid and trust they’ll be compensated fairly stay longer than those working under murky commission policies.
12 Commission Structure Types
Commission-Only Structure
How it works: Reps earn a predetermined percentage of every sale with no base salary. They earn nothing unless they close deals, but commission rates are typically higher to compensate for the risk.
Example: A door-to-door sales rep earns 25% commission per product sold. If they sell 30 products at $1,000 each, 20 products at $5,000 each, and 15 products at $10,000 each, their total commission is $70,000 ($7,500 + $25,000 + $37,500).
When to use it: This structure works for contract or seasonal sales roles with short sales cycles and high commission rates. It’s common in industries like solar, home improvement, and insurance where reps can earn substantial income per deal. However, most experienced reps avoid commission-only roles due to income unpredictability.
Revenue Commission
How it works: Reps earn a fixed percentage of every deal they close based on total sale value. This straightforward model rewards revenue generation without factoring in profit margins or costs.
Example: A company offers a $500 service with a 10% commission rate. Each sale generates $50 for the rep. If they close 40 deals in a month, they earn $2,000 in commission.
When to use it: Revenue commission works well for businesses with standardized pricing and products where the focus is market penetration rather than profitability optimization. It’s common in B2B field sales where deal sizes are consistent and the goal is maximizing customer acquisition.
Territory Volume Commission
How it works: All sales within a designated territory are pooled, and the total commission is divided equally among reps working that region. This structure emphasizes teamwork over individual performance.
Example: Three reps cover a 100-mile territory with a combined quota of $75,000 and a 20% commission rate. Rep A sells $30,000, Rep B sells $26,000, and Rep C sells $22,000. Their combined total of $78,000 exceeds quota, generating $15,600 in commission ($78,000 × 20%). Each rep receives an equal share of $5,200, regardless of individual contribution.
When to use it: Territory volume commission works in collaborative field sales environments where team members support each other on deals or where territories require shared resources. It eliminates internal competition but can frustrate high performers who carry lower producers.
Gross Margin Commission
How it works: Reps earn commission based on actual profit rather than total sale value. The commission percentage applies to gross margin (revenue minus direct costs) instead of the full sale price.
Example: Your company sells a service for $1,000 with $500 in fulfillment costs. The gross margin is $500, and the rep earns a 15% commission on that margin—$75 instead of $150 they’d earn on a 15% revenue commission.
When to use it: This structure aligns sales behavior with profitability goals. It’s ideal for businesses with variable costs or when you need reps to focus on high-margin deals rather than just closing volume. Manufacturing, distribution, and B2B services frequently use gross margin commission to ensure each sale contributes meaningfully to the bottom line.
Draw Against Commission
How it works: Reps receive regular advance payments (draws) that provide income stability while they ramp up. In some cases, draws must be repaid from future commissions; in others, they’re non-recoverable.
Example: A new field sales rep receives a $2,000 monthly draw. In Month 1, they earn $1,000 in commission. They keep the $1,000 earned plus receive an additional $1,000 from the draw, totaling $2,000 in compensation. In Month 3, when they earn $3,500 in commission, they receive the full $3,500 (in a recoverable draw model, $1,000 might go toward repaying previous draw advances).
When to use it: Draw against commission structures help new hires survive while learning your sales process and building their pipeline. It’s particularly valuable in field sales with longer ramp times (60-90 days) or when hiring reps who are new to the industry. Specify whether draws are recoverable or non-recoverable to avoid disputes.
Tiered Commission
How it works: Commission rates increase when reps hit specific milestones, creating built-in accelerators that reward exceeding quota. This structure is highly motivating for high performers who can significantly boost their earnings by pushing past targets.
Example: Reps earn 5% commission on sales up to $100,000 in revenue. Once they exceed $100,000, the commission rate increases to 8% on all additional sales. A rep who closes $150,000 in deals earns $5,000 on the first $100,000 (5%) plus $4,000 on the next $50,000 (8%), totaling $9,000 in commission.
Step-by-step calculation:
- First tier: $100,000 × 5% = $5,000
- Second tier: $50,000 × 8% = $4,000
- Total commission: $9,000
When to use it: Tiered structures excel at driving top performance in competitive field sales teams. They create clear incentives for exceeding quota and naturally separate high performers from average producers. This model is common in SaaS, financial services, and enterprise sales where exceeding quota significantly impacts business outcomes.
Residual Commission
How it works: Reps earn ongoing commission for as long as their accounts remain active and generate revenue. This creates long-term income streams tied to customer retention and lifetime value.
Example: A rep closes a client paying $2,000 per month for your services with a 5% residual commission rate. The rep earns $100 monthly ($2,000 × 5%) for the duration of that contract—12 months, 24 months, or longer if the client renews.
When to use it: Residual commission structures work best for subscription-based businesses, insurance, marketing agencies, and other recurring revenue models. They incentivize quality customer acquisition over quantity, since reps benefit from retaining accounts long-term. This structure also helps with rep retention—building a book of business with monthly residual income makes leaving more difficult.
Multiplier Commission Structure
How it works: A base commission rate is multiplied by a performance factor based on quota attainment. This creates variable payouts that reward hitting benchmarks without the complexity of multiple tiers.
Example: A rep’s standard commission rate is 5%. The multiplier adjusts based on quota performance:
- Under 75% of quota: 0.8× multiplier (4% effective rate)
- 76-85% of quota: 0.9× multiplier (4.5% effective rate)
- 86-100% of quota: 1.0× multiplier (5% effective rate)
- 101-115% of quota: 1.2× multiplier (6% effective rate)
- 116%+ of quota: 1.4× multiplier (7% effective rate)
When to use it: Multiplier structures provide flexibility when you want to reward performance across multiple KPIs or product lines simultaneously. They work well for complex sales organizations where different products or activities deserve different weighting. The downside is added complexity—reps need to understand how multipliers work to stay motivated.
Base Salary Only
How it works: Reps receive a fixed annual salary with no variable commission. Compensation is entirely predictable and performance-independent.
Example: Your organization pays each sales rep $60,000 annually (approximately $1,150 per week) regardless of individual sales performance.
When to use it: Salary-only structures are rare in traditional field sales but appear in organizations where reps function more like customer success or support professionals than quota-carrying sellers. Companies with high-velocity inbound lead flow sometimes use this model. The major drawback is lack of performance incentive—without commission upside, even strong reps have little motivation to exceed minimum expectations.
Base Salary + Commission
How it works: Reps receive both a guaranteed base salary and a commission percentage on sales they personally close. This balanced approach provides financial stability while maintaining performance incentives.
Example: A field sales rep earns a $40,000 annual base salary plus 3% commission on every individual sale. If they close $500,000 in annual sales, they earn $15,000 in commission, bringing total compensation to $55,000.
When to use it: Base plus commission is the most common structure in B2B field sales because it balances risk and reward for both company and rep. The base salary attracts quality candidates who need income stability, while uncapped commission motivates top performance. This structure works across industries and is particularly effective for companies with 90-180 day sales cycles where reps need financial support during pipeline development.
Flat-Rate Commission
How it works: Reps earn a fixed dollar amount for each sale, regardless of the deal’s total value. This simplifies commission calculations and provides predictable earnings per transaction.
Example: A rep earns $200 for every unit sold. If they sell 50 units in a month—whether those units cost $500, $2,000, or $5,000—they earn $10,000 in commission (50 units × $200).
When to use it: Flat-rate commission works best for businesses with limited product variation or when you want to incentivize volume over deal size. It’s common in retail, door-to-door sales with standardized offerings, and subscription services with fixed pricing. The simplicity helps reps forecast their earnings and makes payout calculations transparent. However, it doesn’t reward reps for upselling or closing larger deals.
Split Commission
How it works: Multiple team members share commission on a single deal based on their contribution. This structure encourages collaboration between departments or roles that work together to close business.
Example: A field sales rep who sources and qualifies a lead splits commission 60/40 with an inside sales closer who finalizes the contract. On a $100,000 deal with 10% commission ($10,000 total), the field rep earns $6,000 and the closer earns $4,000.
When to use it: Split commission structures work well for organizations with multi-touch sales processes—like SDRs who book meetings for AEs, or field reps who hand off complex deals to technical closers. They prevent territory disputes and encourage lead sharing. The key is establishing clear rules upfront: Who gets credit? What percentage split? What happens if the deal falls through after handoff? Document these agreements to avoid disputes.
How to Choose Your Commission Structure
Align with Company Goals
Start by identifying your top business priorities for 2026. Are you focused on rapid customer acquisition? Choose revenue commission or tiered structures that reward volume. Need to protect margins? Implement gross margin commission. Trying to penetrate new territories? Consider territory volume commission that encourages teamwork.
Your commission structure should drive the specific behaviors that move your business forward. If your goal is customer lifetime value, build in residual commission. If you’re launching a new product line, add accelerators for reps who exceed new product quotas.
Benchmark Industry Rates
Research what competitors and similar companies pay to avoid losing talent to better offers. Commission rates vary significantly by industry:
| Industry | Typical Commission Rate | Notes |
|---|---|---|
| Technology/SaaS | 5-20% | Often includes quota-based accelerators |
| Real Estate | 4-6% (residential) 4-8% (commercial) | Usually commission-only |
| Insurance | 5-15% | Varies by captive vs. independent |
| Financial Services | 0.25-10% | Depends on product type |
| Manufacturing/Distribution | 7-15% | Often gross margin based |
| Retail | 1-5% | Lower margins, higher volume |
| Field Sales/Door-to-Door | 15-30% | Higher rates offset commission-only risk |
If you’re paying below market, expect retention problems. If you’re significantly above market, verify your economics can support it long-term.
Match Roles to Structures
Different roles need different compensation approaches. Field sales reps carrying full quotas typically work on a 50/50 base-to-variable split, while SDRs focused on prospecting might have a 60/40 or 70/30 split favoring base salary.
Field Sales Reps (Quota Carriers): Base salary + tiered commission with accelerators. They need upside potential for exceeding targets and stability during slow months.
Inside Sales/SDRs: Higher base salary (60-70% of OTE) with commission on meetings set or opportunities created. They’re feeding the pipeline, not closing final deals.
Account Executives (Complex Sales): 50/50 split with longer commission payout terms. Large enterprise deals might pay out over 12-18 months as revenue is recognized.
Factor in Turnover Data
Pull your turnover numbers from the past 12-24 months and interview departing reps. If compensation consistently appears in exit feedback, your structure needs work.
With field sales turnover at 35% industry-wide, small improvements in retention translate to major savings. Replacing a field rep is expensive—recruiting, onboarding, and ramp time costs add up quickly, especially when turnover hits 35% annually. A more competitive commission structure that improves retention by even 5-10% can offset its cost through reduced turnover expenses.
Analyze Productivity Levels
Look at performance distribution across your team. If you have a handful of stars and a large group of underperformers, consider tiered commission with meaningful accelerators. This rewards your top 20% while creating upside motivation for the middle 60%.
Pull conversion reports by rep and identify what separates high performers from average ones. If top reps exceed quota by 40-50%, build accelerators at 100%, 110%, and 125% of quota to capture that potential.
Review Past Performance
Analyze what worked and what failed in previous commission structures. Talk to reps about pain points—unclear payout terms, delayed payments, or confusing calculations all kill motivation even when rates are fair.
Look at behavioral impacts too. Did your last structure incentivize the wrong behaviors? If reps pushed low-margin products because commission was revenue-based, switching to gross margin commission might fix that. If they ignored renewals because they only got paid on new business, add residual commission.
Run OTE Simulations
Calculate your On-Target Earnings—the total compensation a rep receives when hitting 100% of quota. This includes base salary, target commission, and any bonuses.
Example OTE calculation:
- Base salary: $50,000
- Target commission (at 100% quota): $40,000
- Annual bonus potential: $10,000
- Total OTE: $100,000
Run scenarios at 75%, 100%, and 125% quota attainment to verify your structure is affordable at scale and competitive enough to attract talent. If your OTE at 100% quota falls below market rates for your industry, you’ll struggle to hire and retain strong reps.
Commission Structure Best Practices
Automate Tracking and Reporting
Manual commission calculations waste time and create disputes. With 44% of companies now using AI-powered incentive compensation management (ICM) tools, automation has become standard practice rather than a luxury.
Field sales platforms like SPOTIO let reps log activities with one tap, capturing location-verified data for deals and commission-qualifying events as they happen. When reps log a sale with one tap, SPOTIO captures location-verified activity data that syncs seamlessly to your CRM and reporting systems, eliminating manual entry and providing an auditable record for commission calculations. This transparency builds trust—reps can see exactly what they’ve logged at any moment.
Integration between your CRM, sales platform, and commission tool eliminates discrepancies. Reps shouldn’t need to chase down managers for commission statements or dispute missing deals. Real-time visibility keeps everyone aligned.
Ensure Legal Compliance
Written commission agreements protect both company and rep. Document commission rates, payment terms, quota definitions, and what happens if employment ends before commission is paid. State laws vary on commission payments after termination, so consult legal counsel when drafting agreements.
Minimum wage requirements apply even in commission-based roles in most states. If a rep’s commission in a pay period doesn’t meet minimum wage for hours worked, you may need to make up the difference. This rarely impacts strong performers but matters during ramp periods or slow months.
Build clear dispute resolution processes into commission agreements. When disagreements arise about whether a deal counts toward commission or how splits should be allocated, having documented procedures prevents escalation.
Maintain Transparency
Publish commission formulas with real examples showing exactly how payouts are calculated. Reps who understand how to calculate their earnings make better decisions and trust the system.
Poor explanation: “You’ll earn competitive commission on closed deals.”
Strong explanation: “You earn 10% commission on all sales up to $100K in quarterly revenue, 12% on sales from $100K-$200K, and 15% on everything above $200K. Example: $250K in quarterly sales = $10K (first tier) + $12K (second tier) + $7.5K (third tier) = $29.5K in quarterly commission.”
Share commission statements at least monthly, showing YTD earnings, current period performance, and distance to next tier or accelerator. The more visibility reps have, the better they can plan and stay motivated.
Schedule Regular Reviews
Commission structures aren’t permanent. Review your plan every 6-12 months to ensure it still drives desired behaviors and remains competitive. Market conditions change, product lines evolve, and what worked in 2024 might not work in 2026.
Schedule formal reviews with your sales team to gather feedback. Ask what’s working, what’s confusing, and where they see opportunities for improvement. Top performers often have valuable insights about how small tweaks could drive better results.
When adjusting commission structures, grandfather existing deals where possible. Retroactive changes destroy trust and create legal risk. If you need to modify plans, communicate changes at least 30-60 days in advance and honor commitments made under previous terms.
Frequently Asked Questions
What is a typical sales commission percentage?
Sales commission rates typically range from 5-20% depending on industry, deal size, and whether reps receive base salary. Field sales and door-to-door roles often pay 15-30% commission, especially in commission-only structures, while inside sales or account management roles average 5-10% with a base salary.
What is the best commission structure for new sales reps?
Draw against commission or base salary plus commission works best for new reps who need income stability while ramping up. A 60/40 base-to-variable split gives them financial security during the first 60-90 days while they build pipeline and learn your sales process. Once they’re consistently hitting quota, you can shift toward a more aggressive 50/50 split.
Should commission be capped or uncapped?
Uncapped commission drives higher performance by rewarding your best reps without artificial limits. Capping commission saves money short-term but signals you don’t trust top performers and creates incentive to coast once they hit the cap. Unless your business model has structural constraints, keep commission uncapped and use accelerators to amplify high performance.
How often should sales commissions be paid?
Monthly commission payments are standard for most field sales roles with shorter sales cycles. For larger enterprise deals or complex sales, quarterly payments align better with revenue recognition. The key is consistency—whatever frequency you choose, pay on time every period. Late or inconsistent payments destroy morale faster than almost any other management mistake.
What’s the difference between tiered and accelerator commission structures?
They’re essentially the same concept with different terminology. Tiered commission means rates increase at specific thresholds (5% up to $100K, then 8% above $100K). Accelerators describe the higher rates you earn after hitting quota milestones. Both structures reward exceeding targets with better commission rates on incremental sales.
How do you calculate commission on gross margin?
Calculate gross margin by subtracting direct costs from sale price, then apply the commission percentage to the margin, not the full sale price. Example: $10,000 sale with $4,000 in costs = $6,000 gross margin. At 10% commission rate, the rep earns $600 ($6,000 × 10%), not $1,000 ($10,000 × 10%).
Can you change commission structures mid-year?
You can, but it’s risky. Changes mid-year disrupt planning and can damage trust if reps feel terms are changing after they’ve already built pipeline. If you must adjust structures, communicate changes 60-90 days in advance, grandfather existing deals under old terms where possible, and clearly explain why the change benefits both company and reps. Never make retroactive changes to already-earned commission.
What is relative commission and when should it be used?
Relative commission pays reps based on their percentage of quota achieved rather than absolute revenue dollars. A rep who hits 110% of quota earns 110% of their target commission, even if they sold fewer total dollars than a colleague in a larger territory. This approach works when you need to account for vastly different territory sizes or market conditions, ensuring reps aren’t penalized for factors outside their control. It’s less common in field sales but can be useful for organizations with highly variable territory potential.
Build a Commission Structure That Drives Results
Your commission structure drives every decision your reps make in the field—which deals to prioritize, how hard to push past quota, and whether they’ll stick around for the long term. Get it right, and you create a self-reinforcing system where your best reps earn more by driving the results your business needs.
The most effective structures balance three elements: competitive baseline compensation that attracts talent, meaningful upside for exceeding targets, and transparency that builds trust. Whether you choose straight commission, tiered accelerators, or a hybrid model, the specifics matter less than ensuring your team understands exactly how they’re paid and can see their earnings in real time.
SPOTIO’s field sales platform eliminates commission tracking headaches through one-tap activity logging with location verification. Reps log sales from their mobile app while SPOTIO captures location-verified activity data, timestamps, and deal details that sync to your CRM—creating a transparent, auditable record that eliminates commission disputes.
Teams using SPOTIO report 46% productivity increases because reps spend time selling instead of manually tracking activities or chasing down commission statements. Request a demo to learn more.
