Sales compensation plans are one of the strongest behavioral levers in any sales organization. What you pay salespeople — and how you pay them — directly shapes how they sell, what they prioritize, and how long they stay.

This article explains how sales compensation plans work, breaks down salary vs commission, explores bonus models and OTE, and outlines best practices for designing fair, motivating, and scalable comp plans.

1. What Is a Sales Compensation Plan?

A sales compensation plan defines:

• how salespeople earn money

• what activities and outcomes are rewarded

• how performance is measured

• how much reps can earn at different levels of success

A good comp plan aligns rep motivation with company goals.

2. Why Sales Compensation Matters

Well-designed compensation plans:

• motivate high performance

• attract top talent

• improve retention

• align sales behavior with strategy

• drive predictable revenue

Poor compensation plans create:

• gaming of the system

• short-term behavior

• burnout and churn

Compensation is strategy in numeric form.

3. Base Salary vs Commission (The Core Tradeoff)

3.1 Base Salary

Base salary provides:

• income stability

• lower stress

• predictable costs for the company

Higher base salaries are common in:

• complex B2B sales

• long sales cycles

• enterprise roles

3.2 Commission

Commission provides:

• performance-based upside

• strong motivation

• variable cost aligned with revenue

Commission-heavy roles are common in:

• transactional sales

• high-volume environments

• aggressive growth phases

3.3 Salary + Commission (Most Common Model)

Most sales roles use a mix:

• base salary for stability

• commission for motivation

The balance depends on role complexity and risk.

4. Common Salary-to-Commission Ratios

Typical splits include:

• 50/50: equal stability and incentive

• 60/40: slightly more security

• 70/30: consultative or enterprise sales

• 30/70: aggressive, high-risk sales roles

No ratio is “best” — fit matters.

5. What Is OTE (On-Target Earnings)?

OTE is the total amount a salesperson earns when they hit 100% of quota.

OTE = Base Salary + Commission at Quota

Example:

• Base: $60,000

• Commission at quota: $40,000

• OTE: $100,000

OTE sets expectations for both reps and employers.

6. Why OTE Is So Important

OTE:

• attracts the right candidates

• sets performance expectations

• anchors motivation

• supports fair benchmarking

If most reps can’t realistically hit OTE, the plan is broken.

7. Common Sales Compensation Models

7.1 Straight Salary

Pros:

• stability

• predictable costs

Cons:

• weak performance incentive

Best for:

• support-heavy roles

• account management

7.2 Straight Commission

Pros:

• high motivation

• low fixed cost

Cons:

• income volatility

• high burnout risk

Best for:

• short-cycle sales

• independent reps

7.3 Salary + Commission

Pros:

• balance of stability and upside

• most widely used

Cons:

• requires careful design

Best for:

• most B2B and SaaS teams

8. Commission Structures Explained

8.1 Flat-Rate Commission

A fixed percentage of each deal.

Example:

• 10% commission on all revenue

Simple, but less motivating at scale.

8.2 Tiered Commission

Commission rate increases as performance increases.

Example:

• 8% up to quota

• 12% above quota

Encourages overachievement.

8.3 Accelerators

Higher commission rates after quota is hit.

Example:

• 1x commission below quota

• 1.5x commission above quota

Accelerators reward top performers.

8.4 Decelerators

Lower commission rates after certain thresholds.

Used cautiously to control costs.

9. Bonus Models in Sales

Bonuses are typically:

• one-time

• tied to specific goals

• paid quarterly or annually

Common bonus types:

• quota attainment bonus

• product launch bonus

• team performance bonus

Bonuses reinforce strategic priorities.

10. SPIFFs (Sales Performance Incentive Funds)

SPIFFs are short-term incentives:

• contests

• cash bonuses

• gift rewards

Used to:

• drive urgency

• push specific behaviors

Overuse reduces effectiveness.

11. Commission Timing and Payment

Key considerations:

• monthly vs quarterly payouts

• paid on booking vs collection

• clawbacks for churn or refunds

Clear rules prevent disputes.

12. Compensation Plans by Sales Role

SDRs

• base-heavy

• activity and meeting-based bonuses

Account Executives

• revenue-based commission

• accelerators

Account Managers / Customer Success

• retention and expansion incentives

Role alignment is essential.

13. Compensation in B2B vs B2C Sales

B2B

• longer cycles

• higher base

• fewer deals

B2C

• shorter cycles

• higher commission

• volume-driven

Comp plans must reflect sales motion.

14. Compensation and Sales Behavior

Salespeople optimize for what pays them.

If you pay for:

• revenue → they close

• volume → they rush deals

• margin → they negotiate carefully

Compensation design shapes behavior.

15. Aligning Compensation With Sales Strategy

Ensure comp plans align with:

• target customers

• deal size goals

• product focus

• long-term growth

Misalignment creates friction.

16. Sales Compensation and Quotas

Comp plans must align with:

• quota difficulty

• territory potential

• pipeline availability

Unaligned quotas break motivation.

17. Managing Compensation Costs

Balance:

• motivation

• profitability

• scalability

Compensation should grow with revenue, not outpace it.

18. Compensation Transparency

Clear plans include:

• written documentation

• examples and scenarios

• FAQs

Confusion kills trust.

19. Common Sales Compensation Mistakes

❌ overly complex plans
❌ changing plans too often
❌ unrealistic OTE
❌ unclear payout rules
❌ rewarding the wrong behaviors

Simplicity improves adoption.

20. Adjusting Compensation Plans Over Time

Adjust when:

• strategy changes

• market shifts

• roles evolve

Changes should be:

• infrequent

• clearly communicated

• data-backed

21. Compensation Plans and Retention

Fair, achievable comp plans:

• reduce churn

• increase loyalty

• improve morale

Money alone doesn’t retain — fairness does.

22. Compensation for Startups

Startups often:

• offer lower base

• higher upside

• equity options

Risk and reward must be balanced honestly.

23. Enterprise Sales Compensation

Enterprise plans emphasize:

• higher base

• long-term incentives

• multi-year deal rewards

Patience is required.

24. Sales Compensation and Motivation Psychology

Motivation increases when:

• goals feel achievable

• rewards feel fair

• effort feels recognized

Fear-based comp plans backfire.

25. Using Compensation to Drive Focus

Comp plans can prioritize:

• new logos

• strategic products

• expansion revenue

Money directs attention.

26. Compensation Governance

Strong governance includes:

• clear ownership

• approval processes

• audit trails

Governance prevents chaos.

27. Legal and Compliance Considerations

Ensure plans:

• follow labor laws

• define payout terms clearly

• avoid discriminatory practices

Legal clarity protects everyone.

28. Measuring Compensation Effectiveness

Evaluate:

• quota attainment rates

• distribution of earnings

• cost of sales

• retention rates

If only a few reps win, redesign.

29. Best Practices for Sales Compensation Plans

• keep it simple

• align with strategy

• make OTE achievable

• review annually

• communicate clearly

Simple plans outperform clever ones.

30. Final Takeaway

Sales compensation plans are not just pay structures —
they are behavior design systems.

The best plans:

• motivate performance

• reward the right outcomes

• feel fair and transparent

• scale with the business

Design compensation with intention, empathy, and data.

When reps trust the plan, they stop worrying about pay —
and focus on selling.