Key takeaways
- Commission ties part of a seller's pay to the business they close.
- Most B2B plans combine a base salary with commission measured against a quota.
- The plan must say when commission is earned, when it is paid and when it is clawed back.
- A good plan is simple enough that a seller can work out their own payout.
What are the common commission structures
The common commission structures differ in how much pay is fixed and how the variable part grows. Most companies use one of a handful of shapes, sometimes combined.
- Base plus commission: a fixed salary with commission on top, the most common shape in B2B.
- Straight commission: no base, all pay from commission, mostly in transactional or independent sales.
- Tiered commission: the rate rises once a seller passes set levels of quota.
- Flat rate per deal: a fixed amount for each sale, useful when deals are similar in size.
- Margin-based commission: paid on profit rather than revenue, so discounting costs the seller too.
- Draw against commission: an advance paid each month and deducted from later commission.
How is commission calculated in practice
Commission is calculated by applying the plan's rate to the qualifying value of each deal, then adding any tier uplifts or bonuses. Most plans start from on-target earnings: the base salary plus the commission a seller earns at exactly full quota.
An illustrative example: a seller's on-target earnings are £80,000, split evenly between a £40,000 base and £40,000 of target commission, against an annual quota of £400,000 in new contract value. That works out at ten pence of commission for every pound closed. If the plan pays a higher rate above quota, a strong year pays more than on-target earnings; a weak one pays less.
When is commission earned and paid
Commission is earned at the point the plan names, usually when the contract is signed or when the customer pays, and paid on a set schedule such as monthly or quarterly. Paying on signature motivates sellers sooner; paying on cash protects the company from deals that never pay.
Most plans also include a clawback: if the customer cancels or does not pay within a set period, the commission is taken back from future payouts. The rule should be written down before the deal, not argued afterwards.
What makes a commission plan fair and motivating
A fair commission plan pays for results the seller can influence, is simple enough to calculate by hand and stays stable during the year. If sellers cannot predict their own payout, the plan stops changing behaviour.
Align the plan with what the business needs now. If the company wants longer contracts, pay more for them; if it wants new logos, weight those over renewals. Review the plan once a year rather than changing it mid-quarter.
How do commission, bonuses and SPIFFs differ
Commission pays continuously for closed business, a bonus pays for reaching a set goal, and a SPIFF is a short-term incentive for one specific behaviour. A quarterly bonus might reward hitting a team target, while a SPIFF might pay extra for every deal that includes a new product this month.
Use SPIFFs sparingly. Too many of them teach sellers to wait for the next incentive instead of following the main plan.
Sales commission structures compared
How each structure pays and where it tends to fit.
| How it pays | Tends to suit | |
|---|---|---|
| Base plus commission | Fixed salary plus a rate on closed business | Most B2B sales roles |
| Straight commission | Only a rate on closed business | Independent agents and short, transactional sales |
| Tiered commission | A higher rate above set quota levels | Teams that want to reward overperformance |
| Flat rate per deal | A fixed amount per sale | Products with similar deal sizes |
| Margin-based | A rate on profit, not revenue | Businesses where discounting is common |
| Draw against commission | An advance repaid from later commission | New hires and long sales cycles |
Illustrative only: the right structure and rates depend on your market, deal size and sales cycle.
Where Pebbles Ai fits
- CapabilityProspecting & customer recordsDeals in the CRM (in Beta) hold stage, amount, currency, close date and probability, a clear record of closed business to work from. Pebbles Ai does not calculate commission.
- CapabilityAI workspaceAsk the Strategy assistant in chat to pressure-test a draft commission plan: how it pays at different levels of quota and where it might reward the wrong behaviour.
Common questions
Is there a standard sales commission rate?
No. Rates vary with the industry, deal size, sales cycle and how much of pay is fixed, so compare against roles like yours rather than a single average.
Do sales development representatives earn commission?
Often, but usually on meetings booked or qualified opportunities rather than closed revenue, since they hand deals to account executives to close.
Is commission paid on renewals?
Some plans pay on renewals and expansions at a lower rate than new business; others give renewals to account managers with their own plan. The plan should say which.
Do you need software to manage sales commission?
Not at first. A spreadsheet works for a small team with a simple plan; dedicated commission software helps once there are many sellers, tiers and clawbacks to track.
About this page. Written by the Pebbles Ai team for people who run sales, marketing and growth. Last updated .
