reaperinvest Commission Structure
When to Use This Skill
Use this skill when you need to:
- Design a commission plan for sales representatives or affiliates
- Create tiered commission structures with accelerators
- Define clawback provisions and payout schedules
- Build a compensation plan that aligns incentives with business goals
DO NOT use this skill for employee salary planning, freelance rate cards, or affiliate program terms (use affiliate-terms). This is for sales commission design.
Core Principle
A COMMISSION STRUCTURE SHOULD MAKE THE REP'S HIGHEST-EARNING BEHAVIOR IDENTICAL TO THE COMPANY'S HIGHEST-VALUE OUTCOME.
Phase 1: Business Context
Required Inputs
| Input | What to Ask | Default |
|---|---|---|
| Sales model | "What are you selling? (SaaS, services, products, one-time, recurring)" | No default — must be provided |
| Average deal size | "What is your average sale/contract value?" | No default — must be provided |
| Sales cycle length | "How long from first contact to close?" | 30 days |
| Gross margin | "What is your gross margin on sales?" | 60% |
| Target OTE | "What total compensation (base + commission) should a rep earn?" | $75,000 |
| Base/variable split | "What split between base salary and variable commission?" | 50/50 |
| Quota period | "Monthly or quarterly quotas?" | Monthly |
GATE: Do not proceed without sales model, deal size, and target OTE.
Phase 2: Structure Design
Commission Model Options
## Commission Structure: [Company Name]
### Model Selection
| Model | Best For | Complexity |
|-------|----------|-----------|
| Flat percentage | Simple products, early stage | Low |
| Tiered (increasing %) | Motivating overperformance | Medium |
| Tiered with accelerators | SaaS, enterprise sales | High |
| Revenue share | Recurring revenue, partnerships | Medium |
| Gross margin-based | Services with variable margins | Medium |
### Selected Model: [Tiered with Accelerators]
Commission Table
### Commission Rates
| Quota Attainment | Commission Rate | Example Payout |
|-----------------|----------------|---------------|
| 0-50% of quota | [X]% (base rate) | $[X] |
| 51-100% of quota | [X]% (standard rate) | $[X] |
| 101-125% of quota | [X]% (accelerator 1) | $[X] |
| 126-150% of quota | [X]% (accelerator 2) | $[X] |
| 150%+ of quota | [X]% (kicker) | $[X] |
### Quota
- Monthly quota: $[X] in [revenue / bookings / closed deals]
- Quarterly quota: $[X]
- Annual quota: $[X]
### OTE Breakdown
| Component | Amount | % of OTE |
|-----------|--------|---------|
| Base salary | $[X]/month | [50]% |
| Target variable (at 100% quota) | $[X]/month | [50]% |
| **Total OTE** | **$[X]/month** | **100%** |
Phase 3: Rules and Provisions
Clawback and Recovery
### Clawback Provisions
| Scenario | Clawback Rule |
|----------|--------------|
| Customer cancels within [30] days | 100% commission clawback |
| Customer cancels within [31-90] days | 50% commission clawback |
| Customer fails to pay | Commission reversed upon chargeback/nonpayment |
| Fraudulent sale | 100% clawback + disciplinary action |
### Payment Schedule
- Commission calculated: [End of each month]
- Commission paid: [15th of the following month]
- Clawback window: [90 days from sale date]
- Minimum payout threshold: $[50]
Special Rules
### Additional Provisions
**New rep ramp:** [X]-month ramp with reduced quota
- Month 1: [50]% quota, full commission rate
- Month 2: [75]% quota, full commission rate
- Month 3+: Full quota
**Team deals:** If two reps collaborate, commission is split [50/50 or based on contribution].
**Renewals:** [X]% commission on customer renewals (typically lower than new business rate).
**Upsells/expansion:** Treated as [new business / renewal rate] depending on [criteria].
**Spiffs (bonuses):** $[X] bonus for [specific behavior — multi-year deals, strategic accounts, new product sales].
Phase 4: Documentation
Commission Plan Document
## [Company] Sales Commission Plan — [Year]
### Plan Summary
- Effective date: [Date]
- Plan period: [Annual / Quarterly]
- Eligible roles: [List]
- Changes from prior plan: [List or "New plan"]
### Compensation Structure
[Insert tables from Phase 2]
### Rules and Provisions
[Insert from Phase 3]
### Dispute Resolution
Commission disputes must be submitted in writing within [30] days
of the commission statement. Resolution within [15] business days.
### Plan Modifications
Company reserves the right to modify the plan with [30] days notice.
Changes do not affect commissions already earned.
### Acknowledgment
Employee signature: _______________
Date: _______________
Example: SaaS Company (ACV $12,000)
OTE: $90K ($45K base + $45K variable). Monthly quota: $40K in new ARR.
| Attainment | Rate | Payout on $40K |
|---|---|---|
| 0-75% | 5% | Up to $1,500 |
| 76-100% | 10% | $1,500-$2,500 |
| 101-125% | 15% | $2,500-$4,375 |
| 125%+ | 20% | $4,375+ uncapped |
At 100% quota: $3,750/month variable = $45K annual. Clawback: 100% if churn in 60 days.
Anti-Patterns
- Capped commissions — caps kill motivation once a rep hits quota. Top performers stop selling. Leave upside uncapped.
- Commissions on revenue without margin consideration — reps will discount to close. Tie commission to margin or set discount approval thresholds.
- No clawback provision — without clawbacks, reps have no incentive to ensure deal quality
- Changing the plan mid-period — destroys trust. Only change plans at period boundaries with advance notice.
- Overly complex structures — if a rep cannot calculate their own commission on a napkin, the plan is too complex.
Recovery
- Cannot afford base salary (solo founder): Use commission-only with higher rates (15-25%). Attract with uncapped earnings potential and leads provided.
- Reps gaming the system: Identify which behavior is being incentivized that you did not intend. Adjust the structure to align incentives.
- High churn on commissioned deals: Implement or extend clawback windows. Add a quality bonus for deals that retain beyond 6 months.
- Transition from one plan to another: Honor all deals in the pipeline under the old plan. New plan applies to new opportunities only.