Sales commission: What is the best structure for 2025?

"Whether you're a CEO or Sales Director, the sales compensation plan is probably the most powerful tool you have to drive sales strategy."  

‍Mark Roberge, VP Sales at Hubspot.  

As Mark Roberge puts it very well, constructing a sales compensation policy is a strategic issue that has a direct impact on team performance and the overall revenue of the company.

A well-structured sales commission plan is more than just a motivational tool for sales reps. It’s a powerful way to improve the business strategy, attract top talent, and drive sales performance. According to a study conducted by Primeum, 87% of managers believe that introducing commission pay is useful in motivating their sales teams.

But where do you start? What type of commission structure is best? What role does a fixed base salary play in the overall compensation model? Qobra provides all the essential keys to design a sales compensation plan that boosts performance and drives business growth.

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1. ‍What is sales commission?

A sales commission is a financial incentive paid to sales reps and salespeople based on their performance. It is a type of commission compensation designed to motivate sales teams to achieve sales goals, close more deals, and increase revenue for the company.

Unlike a fixed salary, a commission-based pay plan rewards sales reps for selling products or services. This incentive model is widely used across industries, especially in roles where direct sales performance has a measurable impact on revenue generation.

How Are Sales Commissions Calculated?

Commissions can be calculated as a percentage of the total sale or as a flat rate for each deal closed. For instance, a company may offer sales reps a 10% commission on every product they sell or a $500 bonus for every new customer acquired.

This approach motivates sales teams to sell more and ensures that their pay is directly tied to their contributions to the company's revenue. The commission rate can vary depending on the role of the salesperson, the industry, and the type of products or services being sold.

Why Are Sales Commissions Important?

• Motivation: Sales reps are driven to exceed their quota and hit their sales goals to increase their earnings.
• Attracting Talent: Offering a competitive commission plan helps recruit top salespeople in a competitive labor market.
• Performance-Based Rewards: Unlike a fixed salary, commission plans reward top performers, encouraging them to reach higher levels of performance.
• Cost Control: Companies only pay commissions when sales are made, making it a cost-effective way to manage labor expenses.

The key to success lies in crafting a compensation plan that is simple, transparent, and aligned with the overall business strategy. Companies often use a mix of base salary plus commission pay, flat-rate commissions, or tiered commission structures.

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2. What are the benefits of a successful commission structure?

A strong commission structure offers numerous benefits for the sales team and the company alike. Here’s how the right compensation structure can positively impact sales performance:

• Drives motivation among sales reps
• Increases team loyalty, reducing turnover
• Attracts top talent in the competitive sales labor market
• Aligns team performance with company goals
• Improves employer branding, making the company a desirable place to work

"There's no mystery about it, a good commission pay plan drastically impacts retention, motivation and performance."

Vladimir Ionesco, Director of Global Sales Performance at Doctolib

These benefits are easy to see for anyone wishing to implement or review the remuneration policy for the sales team. However, the question of which remuneration elements should be included often remains a complex challenge...

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3. How to define commercial remuneration structure?

Initially, although different, the remuneration policy for sales teams should follow similar rules as for the rest of the company. 

Among the basic remuneration elements that can be found in a global salary policy, here are the main ones:

• Benefits in kind (computer/desktop equipment, lunch vouchers, gift vouchers, etc.)
• Employee share ownership
• Stock options
• The company savings plan: profit-sharing and participation 
• The collective retirement savings plan

However, these elements are not enough for the company to enjoy the benefits mentioned above, such as retention, attractiveness, motivation, etc. Indeed, sales force remuneration is a special case and has its own objectives.

Today, one of the first points of attention for salespeople is commission pay, in other words, commissions or bonuses. Determined according to their individual performance, it represents an important or even majority part of their overall remuneration.

"The first motivation lever for Sales Reps comes from the bonus. They are sportsmen at heart and this notion of reward versus effort versus merit is absolutely key."

Vladimir Ionesco, Director of Global Sales Performance at Doctolib

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4. 5 rules to determine sales compensation

Before embarking operationally on the implementation or review of the commission pay plan, it is essential to find answers to the following questions:

• What are the company's business objectives? 
• What is the budget allocated to the remuneration of sales teams?
• What are the sa;es remuneration practices in companies in your sector? 
• What is the cost of living in your city?

"There is no magic formula for building a good commission pay plan. Instead, there are key principles to keep in mind, and the first is alignment with the business strategy."

Aude Cadiot, Revenue Operations Lead at Spendesk

The answers to these questions are therefore essential for shaping a commission pay plan. In particular, they will help to set a framework for its design.

Before going any further and getting to the heart of the matter, here are 5 essential rules to keep in mind when drawing up a commission pay plan:

• Simplicity. The commission pay system for salespeople must be simple to explain. A complex plan will be misunderstood by managers, and therefore misunderstood by salespeople. In the end, salespeople do not achieve their objectives, they do not receive their commission pay, which has a strong impact on motivation and loyalty.
• Linked to objectives. Commission pay should be directly linked to the company's strategic objectives. For example, a company that wants to expand in the United States should design the objectives of its sales staff accordingly.
• Short payment cycle. To avoid frustration among sales teams, it is important to compress the time between the signing of a contract and the payment of the related commission remuneration to a minimum.
• Fairness and transparency. The company's commission pay plan should be fair to all employees. This does not mean that it should be the same for everyone, but that it should be transparent and differences should be explained.
• Easy to implement. According to a study from Primeum, comment-remunerer.com and MeteoJob, 55% of companies surveyed believe that their commission pay schemes are not well formalized and detailed. The rules governing the commission pay plan must be clear, simple and transparent for all departments that are closely or remotely involved (finance, HR, etc.). This facilitates its implementation, measurement and execution.

As we will see below, commissions can vary between different populations and positions in the company. However, the rules we have just mentioned are valid and applicable to all.

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5. Adapting the commission structure to each population

For a commission remuneration policy to be effective, it is essential that it is adapted to its beneficiaries, and in particular to their objectives. Indeed, each sales team is composed of different teams, each of which has specific qualitative and quantitative objectives. It is therefore logical that their remuneration is structured differently.

In general terms, here are the different positions that can be found in a sales team, and their associated objectives:

• Account Executives (AE). Their job is to sign new clients and/or contracts. Their commission remuneration must therefore be linked to the revenue they generate.  
• Sales Development Representatives (SDR). The SDR's job is to generate qualified meetings for the Account Executive. Their commission remuneration therefore depends on the number of qualified meetings made and/or the income generated in a second phase by these meetings
• Marketing Development Representatives (MDR). Unlike SDRs, MDRs do not generate meetings  directly, but process those resulting from indirect meeting settings (website, telephone, email, etc.). Although these meetings are partly generated by the marketing strategy, the MDRs have no control over the volume of these requests or their quality. Their commission remuneration can be defined according to the volume of incoming requests and/or, in a second phase, the potential revenue generated by these meetings.
• Customer Success Managers (CSM). As their name suggests, CSMs are responsible for building customer loyalty. Their commission remuneration depends mainly on their ability to renew a contract, but also to sell additional products and/or services.

Tailoring the commission pay plan to each team in the sales department therefore makes it possible to meet all strategic objectives. It is a way of rewarding each employee according to his or her performance, while maintaining equity between teams.

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6. What is the ideal split between fixed and commission pay?

Although there is no single answer because the "risk-reward balance" is specific to each company's objectives, there are a few rules to follow to determine the ideal split between fixed and commission pay.

Firstly, it is strongly discouraged to go to extremes, either in terms of fixed or commission pay. In concrete terms, this means that it is unwise to spend 10% or less on fixed or commission pay. 

Indeed, in the case of a commission remuneration that is too high, the majority of candidates refuse to join the company because it leads to too much pressure and instability. Moreover, it is difficult for them to project themselves on the feasibility of their objectives.

Conversely, a commission remuneration that is too low will lead to a loss of motivation on the part of the sales teams and therefore to high turnover. 

To avoid negatively impacting the levers of attractiveness, motivation and retention, here are a few examples of the distribution between fixed and commission remuneration according to the different professions in a sales team:

• Account Executives (AE) and Sales Executives: 25-60% fixed and 40-75% commission. As explained above, the core business of sales people is to sign new customers and/or contracts, which explains the high proportion of commission pay. 
• Sales Development Representative (SDR): 70% to 80% fixed and 20% to 30% commission.
• Customer Success Management (CSM) and Marketing Development Representative (MDR): 80-90% fixed and 10-20% commission.

It is important to note that the above commission shares are also to be adapted according to the following commission:

• The stage of maturity of the market. In the case of a highly competitive market with a high sales volume, the company can position the commission remuneration in the high bracket because there is a high potential. 
• The stage of maturity of the company. A fast-growing company may also set the commission compensation at a high level in order to motivate its sales teams.
• The seniority of the employee. In general, junior employees are motivated by a high commission percentage. Conversely, senior employees prefer to have a larger fixed portion because of their family and financial situation (mortgage, etc.). However, some experienced employees prefer a higher commission part of their remuneration because they have knowledge of the business and/or the market and/or the company that is favorable to them in order to achieve their objectives.
• The sales cycle. Depending on the length of the sales cycle of the product and/or service offered by the company, the commission part will be more or less important. A long sales cycle means that the volume of sales will be lower than for a short cycle, and therefore, generally speaking, the share of commission is less important.

"The split between fixed and commission pay should be continuously reviewed in line with the maturity of the business and the products."

Vladimir Ionesco, Director of Global Sales Performance at Doctolib

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7. How to communicate effectively on sales remuneration?

Last but not least, communication. Indeed, in order to reap the fruits of the work previously accomplished, it is essential to communicate in a clear and transparent manner, without which, commission pay will have little or no impact on the attractiveness, motivation and loyalty of sales teams.

Here are some basic rules to ensure that commission pay schemes are well communicated:

• Communicate regularly. According to a Gallup Study, only 40% of employees claim to know their company's values and objectives. "Communication is the art of repetition", communicating at the time of onboarding is not enough. Indeed, although this is an important moment to give employees transparency and visibility and to help them project themselves, it is essential to regularly remind them of the functioning, rules, objectives, etc. of commission pay. Examples of privileged moments to communicate: review of objectives, team meetings, end of quarter, sales team seminar, annual interview, etc.
• Be educational and transparent. It is essential to ensure that the commission pay model(s) in its entirety, i.e. the fixed/commission split, accelerators, increments, etc., are understood by all. The reasons for these different choices must be explained transparently, and in particular how these choices serve the company's objectives. This can be done through regular communications on the topic, through a dedicated discussion channel or during individual meetings. 
• Listening to employees. Commission pay is a source of attractiveness, motivation and loyalty only if it meets the needs and expectations of employees, which is why it is important to listen to them on the topic and take their comments into account. This does not mean that you should respond favorably to all their requests, but that you should study them and come back to them with a constructive response. 

However, without tools, following the above rules to the letter is very time-consuming and requires a lot of time and energy from the teams involved. 

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8. How to deploy your commission plan?

Today, too many companies still complete all the previous steps but manage the subject of commission pay with ill-adapted tools such as Excel or Google Sheet.

"Excel involves formulas that are sometimes broken, calculations that are sometimes a bit opaque since Sales didn't necessarily understand them and, above all, ergonomics that are not as obvious as Qobra."

Clément Bouillaud, Director of Operations at Partoo.

According to a study on commissions in France carried out by Qobra and Modjo, 68% of employees who use Excel or Google Sheets to calculate and manage commissions are not satisfied. On the other hand, 85% of employees who use commission calculation and management software are satisfied.

Indeed, there are many disadvantages to using these solutions: manual entry, opacity, no connections with the CRM and payroll software, lack of visibility, no sales emulation (SPIFS), time-consumption, etc.

Results ?

Lack of commitment and motivation from your teams, waste of time for people in charge of commission pay, high turnover and lack of attractiveness. In other words, the exact opposite of the benefits promised by commission pay (the cobra effect).

It is therefore essential for the company to have a tool that enables it to deploy and enhance its commission pay policy. In its selection, the company must in particular favor a tool that: 

• Avoids manual input errors
• Automatically calculates the amount of commissions
• Transmits commissions to the payroll department at one click. 
• Helps employees to know exactly where they are at achieving their goals
• Provides the same level of transparency for employees, managers, finance teams and HR teams.

A set of requirements that Qobra meets with its commission calculation software.

"As we know, the best sales people pay a lot of attention to their commissions, so they very often want to know where they are in achieving their goals. With Qobra, you can directly see in real time, as a Sales person, on your dashboard, how much you are going to earn." 

Matthieu Saroli, Enterprise Account Executive at Didomi.

9. A few examples of commission structures to inspire you

When it comes to creating a commission structure for your sales team, it’s essential to understand that one size does not fit all. Different companies, industries, and sales roles have unique requirements, so the structure should be tailored accordingly. Below are some of the most effective commission models used by top-performing sales teams.

Straight Commission

This structure rewards sales reps solely based on their sales performance. There is no fixed salary, which means the salesperson's entire income is made up of commissions. This model works best for industries with large transaction values, like real estate or luxury goods.

• How it works: Salespeople earn a percentage of each sale they close (e.g., 20% of the sale value).
• Who it works for: Real estate agents, brokers, and independent sales agents.
• Benefits: High motivation to sell since there is no base salary.
• Drawbacks: Risk of turnover if employees fail to earn enough.

Salary Plus Commission

This is one of the most common commission structures used by companies. It provides a base salary along with a commission for every sale made. This plan ensures financial stability for the sales reps while still providing incentives for high performance.

• How it works: Salespeople receive a fixed salary (e.g., $50,000 annually) and an additional percentage of their sales (e.g., 5% of total sales).
• Who it works for: SaaS sales, B2B companies, and any industry with long sales cycles.
• Benefits: Offers security for sales reps, making it easier to attract talent.
• Drawbacks: Less urgency to close deals since part of the income is guaranteed.

Tiered Commission

A tiered commission plan rewards salespeople with higher commission rates as they hit specific sales milestones. This structure incentivizes sales reps to overachieve and sell more products or services.

• How it works: The commission percentage increases as sales reps achieve higher revenue targets (e.g., 5% on the first $100,000 in sales, 7% on the next $100,000, and 10% after that).
• Who it works for: Enterprise sales teams, Account Executives, and companies with large sales quotas.
• Benefits: Motivates top performers to exceed their targets.
• Drawbacks: Requires proper tracking to avoid confusion or disputes.

Revenue-Based Commission

This model bases the commission on the total revenue brought in by a salesperson. Unlike a "per-sale" commission, this approach incentivizes reps to generate ongoing revenue streams, particularly in subscription-based industries.

• How it works: Sales reps receive a percentage of the total revenue they generate for the company (e.g., 8% of total revenue generated by a client during the first year).
• Who it works for: Subscription-based services, SaaS, and recurring revenue businesses.
• Benefits: Promotes long-term thinking and encourages reps to sign high-value clients.
• Drawbacks: Requires long-term tracking of customer revenue.

Gross Margin Commission

This structure calculates commissions based on the gross profit (revenue minus cost of goods sold) rather than total revenue. This approach prevents salespeople from offering unnecessary discounts just to close deals.

• How it works: Commissions are paid as a percentage of the profit, not the revenue (e.g., 10% of the profit on every deal closed).
• Who it works for: Companies selling products with varying profit margins, such as wholesalers or manufacturing firms.
• Benefits: Prioritizes profitability, not just sales volume.
• Drawbacks: More complex to calculate, and sales reps may feel demotivated if profit margins are low.

Draw Against Commission

This structure guarantees that salespeople receive a minimum amount of pay, even if they don't close deals. The company provides an "advance" on future commissions, which sales reps must repay once they start making sales.

• How it works: Reps receive a fixed draw at the beginning of the month (e.g., $2,000) that is deducted from the commission they earn later.
• Who it works for: Companies with long sales cycles where deals take time to close.
• Benefits: Offers income security for new reps.
• Drawbacks: Reps may feel stressed if they struggle to meet quotas and repay the draw.

Base Pay Plus Bonus

This structure provides a steady salary with a lump-sum bonus when specific sales targets are met. It's a simple approach that’s often used for entry-level sales roles.

• How it works: Reps receive a fixed salary and a fixed bonus for reaching a pre-defined quota (e.g., $2,000 bonus for every 10 deals closed).
• Who it works for: SDRs, Marketing Development Representatives (MDRs), and roles focused on lead generation.
• Benefits: Simple to track and calculate.
• Drawbacks: Doesn’t incentivize higher-than-expected performance, as the bonus is capped.

Commission Only with Accelerators

Similar to a straight commission plan, this model adds an "accelerator" that increases commission rates once a rep exceeds their sales quota.

• How it works: If a rep surpasses their target, their commission rate increases (e.g., from 8% to 12%).
• Who it works for: Enterprise-level sales reps with large deals.
• Benefits: Drives high performance and motivates top-tier reps.
• Drawbacks: Complex to track and calculate, especially for larger sales teams.

Hybrid Model

This model blends several commission structures into one comprehensive plan. For instance, a company might offer a combination of a base salary, a tiered commission, and a revenue-based bonus.

• How it works: Hybrid plans combine different commission structures to motivate various types of behavior (e.g., 50% salary, 20% performance bonus, 30% revenue share).
• Who it works for: Large companies with varied sales roles and product portfolios.
• Benefits: Flexible and customizable for different roles and sales goals.
• Drawbacks: Complex to administer and requires advanced tracking tools.

Choosing the right commission structure is critical to driving performance, motivation, and retention in your sales team. The best structure depends on your business goals, team roles, and industry. Each structure has its own unique benefits, and many companies opt for hybrid approaches that blend elements of multiple models. By selecting the right sales commission plan, you can increase revenue, motivate your team, and create a fair, transparent environment where high performance is rewarded.

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The final word...

A successful sales remuneration policy is a source of attractiveness, motivation and team loyalty. However, there are several rules to follow to make it work, namely to create a compensation plan that is simple, linked to the company's objectives, fair, transparent and easy to implement.  

It should then be adapted to each type of function in the sales team, i.e. Account Executives, SDRs, MDRs and CSMs. Then, depending on their function and other peripheral commissions, the share of commission pay in the total remuneration should be determined. 

Finally, it is essential to properly disclose and deploy this commercial remuneration strategy by following communication recommendations and using tools dedicated to the management of commission remuneration.