5 Types of Sales Compensation Plans
It can be difficult determining how to compensate your sales team. A well-structured plan motivates staff and aligns individual performance with company growth. Here are five effective types of sales compensation plans:
1. Base Salary Only
Provides security for the employee but offers the least incentive for aggressive sales growth.
2. Base Salary + Commission
The most common approach, balancing security with the drive to earn performance-based rewards.
3. Commission Only
Highly incentivized, shifting the financial risk mostly to the salesperson but often attracting high-performers.
4. Gross Margin Commission
Rewards employees based on company profitability per sale rather than just total revenue volume.
5. Tiered Commission
Increases the commission rate as the salesperson hits specific volume milestones, encouraging consistent over-performance.
When selecting a plan, consider your business model and the sales cycle length before committing to a structure.