7 Effective Ways to Structure Team Sales Commissions

Top Sales and Commission Structures

• Look at good sales and pay plans that can help your team do better and match your business goals.
• See how different ways of paying people, like plans where you give more when someone sells more or having a steady pay plus extra money for sales, give your sales team reasons to work hard.
• Learn what is good and what might be hard about each pay plan so you can keep your best salespeople.
• Find out which way of paying fits well with your team’s sales targets and your money plans.
• Get easy tips for making a simple and good pay plan for the people on your sales team.

Introduction

The way you set up your sales commission is very important to your business. It has a big impact on how your sales team feels about the work they do. When they feel good and feel that what they do matters, they can do better at their job. This will help your team hit sales goals and help your business grow.

Picking the right pay rate and plan can help you get the best people for your sales team. It will also help them feel excited and push them to work harder. A good pay plan should match what you want from your sales with the main goals of your company. This way, your pay plan will work for both your business and the sales team.

Top Sales and Commission Structures Explained

Sales commission plans are important because they keep your sales team working hard. These plans can change a lot from one company to the next. Each plan gives rewards to sales reps based on how well they do, how close they get to money targets, or how the company gets sales. Some use easy ways, like a steady pay plus extra money from what you sell. Other plans give more at each level you reach or use your profits to set pay. Picking the right pay plan matters for every business. Here, you can read about the main types of sales commission plans so you know what to choose.

Top Sales and Commission Structures Explained

Sales commission plans are important because they keep your sales team working hard. These plans can change a lot from one company to the next. Each plan gives rewards to sales reps based on how well they do, how close they get to money targets, or how the company gets sales. Some use easy ways, like a steady pay plus extra money from what you sell. Other plans give more at each level you reach or use your profits to set pay. Picking the right pay plan matters for every business. Here, you can read about the main types of sales commission plans so you know what to choose.

1. Base Salary Plus Commission Structure

This pay system has a fixed salary and lets people earn more when they make sales. Workers get the same paycheck each time. They also get extra money for the sales they make. For example, if the base pay is $50,000 and the company gives 10% more for sales, selling $200,000 in one year will give another $20,000. The worker then will get a total pay of $70,000 for the year.

A main good thing about this plan is the way it keeps your money safe. Sales reps do not have to count only on commissions. They still get their base pay, even if sales slow down. This can help a lot in tough times, like during a recession.

This way of paying people is good for companies that want to get and keep the best workers. It helps them do this and not spend too much. But if a company pays less basic pay, they might have to give out more in bonuses later. So, careful planning of pay is needed. This helps make sure the pay stays fair and will keep working well in the long run.

2. Straight Commission Structure

A straight commission, which is also known as a commission-only plan, means that people in sales jobs get paid a part of what they sell. This is used in work like real estate or selling cars. The rate can be as high as 20% to 30%. For example, if you sell $100,000 worth of products at a 30% rate, you will get $30,000.

This kind of pay ties what you make to how well you sell. It helps push people to get more sales. For the company, the cost will go up when there are more sales and down when there are fewer sales, since your pay is connected to selling. But pay that goes up and down can make it hard for sales reps to have steady money when there are slow times.

This system is great, especially if you are a rep or part of a group that sells high-priced products. You need to have clear ways to work so there is less stress for everyone. Good rewards help keep people excited and working hard.

3. Tiered Commission Structure

A tiered pay structure lets the rate increase as sales reps go past their goals. This way, they feel pushed to do better than their set targets. For example, a company might give 3% on sales from $0 to $10,000. The rate could move up to 5% for sales from $10,000 to $20,000. If a rep makes over $20,000 in sales, they may get 8% on the extra amount.

This lets top workers stay motivated. It also helps the business check if it has enough money before paying more. Some companies do not give commissions right away. They do this to keep their profits safe.

This way of working can make people try harder. But it may upset sales reps if the top levels feel too hard to reach or if the goals do not feel fair. Clear talk about sales targets and levels helps people stay motivated. It also makes them feel like they work well together.

4. Draw Against Commission Structure

The draw against commission setup helps sellers feel safe by giving them steady pay each month. Sales reps get money at the start of each month. This money comes out of their future pay from sales. For example, if you are told you will get $3,000 each month, but you only earn $2,000 in sales pay, you will still get the $3,000. You will pay back the extra $1,000 when you earn more from sales down the road.

This plan gives new team members steady pay when they start. People feel safe about their money as they learn the new things they need for the job. Clear details on how to pay back help people feel less worried and keep things open. Companies that use this plan should talk honestly with reps so everyone is involved and knows what will happen.

5. Territory Volume Commission Structure

This way of working gives some of the money from sales to each team member in the same sales area. For example, say there are three sales reps that work together to sell $90,000. With a 10% rate, each one will get $3,000.

Territory volume commissions help people in an area work together. They can chase after new chances in their region. This setup lets sales reps work with each other and get new leads. But there can be times when the people who do more feel bad if all get the same money, even if some do less work. When leaders are open and give more rewards for big wins, it can help keep things fair. It also helps to keep good teamwork going.

6. Residual Commission Structure

Residual commissions give rewards for long-term wins. They pay sales reps a set amount over and over if the customer keeps paying money. This way works well for things like the money business or when selling products that have a subscription. For example, if you sign someone who brings in $2,000 for the business each month, you can get 5% of that money every month.

This way can help you build strong relationships with your customers and keep them coming back. When you do this, sales reps can get a steady income. But there are some reps who want money right now, so they may not feel happy with just residual plans. A mix of upfront bonuses and residual commissions can give you fast rewards and also a steady paycheck over time.

7. Gross Margin Commission Structure

Gross margin pays commissions from profit. It does not use all the sales money. For example, if you sell an item for $10,000 and it costs $2,000, then the gross margin is $8,000. At a 5% rate, the rep will get $400 for this sale.

This setup makes sure payments line up with how much profit there is. It helps sales reps focus on products that make more money. But working out the right costs is not easy. Giving simple rules and tools can help reps see how their pay is decided and build trust.

Final Thoughts 

Good sales pay plans help the sales team work towards the company’s goals. They also push people on the team to meet and beat their targets, which can help the company make more money. A fair and clear pay plan helps bring in good workers but also helps keep them over time. This plan also helps build strong bonds between people and keeps the company’s money safe. In the end, the right way of paying salespeople helps the company stay strong for years.

Frequently Asked Questions

What is the most common sales pay setup in the us?

The most common sales pay setup in the united states is base pay plus extra money for sales. This pays a set amount as the base. Then you get more if you sell more. Many companies use this because it gives steady pay every time but also gives you a reason to try your best. This way, people want to do better and also feel secure about their income.

How do you calculate a tiered sales commission?

You start by making different sales levels. Then, you give a set commission rate for each one. You need to keep track of what each person sells. Next, see which level their sales fit into and use the right rate for that. This way, you can give people a good reason to keep working hard and making more sales.

Can you combine different commission structures in one plan?

Yes. You can use more than one kind of commission structure at the same time in one plan. This makes the plan easier to change and lets you connect rewards to many sales goals. It can also help get people to do what you want them to in their jobs.

What are usual commission rates for sales reps in the us?

In the us, sales reps usually get a commission that is from 5% to 20% of sales. The rate can go up or down depending on the industry, how much money the company wants to make, and what kind of sales work you do. If you look at your rate compared to others in your industry, you help your business keep up with the rest.

Written by Wesley Gu Updated July 3, 2025 by Albert Fang