Sales Compensation Planning

Sales Compensation Planning

Designing sales compensation plans — from quota setting and commission structures through territory design, accelerators, clawbacks, and plan governance.

When to Use

• Building or revising sales compensation plans
• Setting quotas for sales reps and teams
• Designing commission rates and accelerators
• Balancing base salary vs variable pay
• Managing comp plan administration

Compensation Models

COMP_MODELS = {
    'straight_commission': '100% variable, % of revenue closed',
    'base_plus_commission': 'Base salary + variable % on attainment',
    'tiered_commission': 'Increasing commission rate at higher attainment levels',
    'gross_margin': 'Commission based on deal profitability, not just revenue',
    'team_based': 'Mix of individual attainment and team/company performance',
}

class CompPlan:
    """Design and simulate sales compensation."""
    def __init__(self, base_salary: float, quota: float, 
                 commission_rate: float = 0.10):
        self.base = base_salary
        self.quota = quota
        self.commission = commission_rate
        self.accelerator = 0.15  # above quota rate
        self.clawback_days = 90
    
    def calculate_payout(self, closed_revenue: float) -> Dict:
        attainment = closed_revenue / self.quota
        variable = 0
        
        if closed_revenue <= self.quota:
            variable = closed_revenue * self.commission
        else:
            variable = (self.quota * self.commission + 
                       (closed_revenue - self.quota) * self.accelerator)
        
        return {
            'base': self.base / 12,
            'variable': round(variable, 2),
            'total': round(self.base / 12 + variable, 2),
            'attainment_pct': round(attainment * 100, 1),
        }

Common Pitfalls

1. Plan too complex — reps can't calculate their own commission; keep it simple
2. Changing plan mid-year — erodes trust; only change for extreme circumstances
3. No clawback policy — deals that churn within 90 days should reverse commission
4. Sandbagging — closing deals slowly to make next quota easier; use accelerators
5. No governance — inconsistent application of comp rules causes legal exposure

Verification Checklist

• Compensation model selected (base+commission, tiered, gross margin, etc.)
• Quotas aligned with company revenue targets (bottoms-up + top-down)
• Commission rates competitive for your market/industry
• Accelerators for above-quota performance
• Clawback policy for early churn
• Plan documentation written in plain language
• Comp plan administered in CRM (Salesforce, HubSpot)
• Plan reviewed quarterly for effectiveness
• Legal/compliance review for regulatory requirements