How Sales Compensation Works (2026 Guide)

What is sales compensation?

Sales compensation is the total pay a sales rep earns—typically a mix of fixed pay (base salary) and variable pay (commissions, bonuses, SPIFFs). The variable portion is tied to measurable business outcomes such as:

• Revenue or bookings (e.g., contract value)
• ARR / MRR (common in SaaS)
• Gross margin or contribution margin (common in hardware and services)
• Pipeline creation (common for SDR/BDR teams)
• Renewals and expansion (common for Account Management / Customer Success)

A good plan does two things at once: it motivates the rep and it protects the business with clear rules, eligibility, and auditability.

Key terms: OTE, quota, attainment, commission rate

OTE (On-Target Earnings)

OTE is what a rep earns if they hit their target. It usually includes base salary + expected variable pay at 100% performance.

Quota

Quota is the performance target (often quarterly or annually). It can be defined as ARR, bookings, revenue, margin, or another measurable outcome.

Attainment

Attainment is performance versus quota. Example: if quota is $500k ARR and the rep sells $600k ARR, attainment is 120%.

Commission rate

The commission rate is how much a rep earns per unit of performance (e.g., 8% of bookings or $X per $1 of ARR). Many plans use tiers: a lower rate below quota and a higher rate above quota (accelerators).

The building blocks of a sales compensation plan

Most plans are combinations of these building blocks:

Common sales comp structures in 2026

1) Straight commission

Reps earn a percentage of sales with little or no base salary. This is less common in enterprise SaaS, more common in certain transactional industries.

2) Base + commission (most common)

The most common model: a base salary plus commissions that scale with performance. This is typical for Account Executives (AEs) selling new business.

3) Quota-based bonus plans

Reps earn discrete bonuses for hitting thresholds (e.g., 80%, 100%, 120%). This is common for teams where output is not purely revenue-based (e.g., SDRs, partner managers).

4) Tiered commission with accelerators

Rates increase after quota. Example: 6% up to 100% attainment, then 10% above 100%, then 12% above 130%. This encourages end-of-quarter pushing and rewards over-achievement.

5) Profit / margin-based compensation

Commission is based on gross margin or contribution margin. This helps prevent reps from discounting too heavily just to win deals.

When commissions get paid: booking vs revenue vs cash

Payout timing is one of the most important (and most misunderstood) design choices. Common triggers include:

Booking (deal signed)

• Pros: motivating; aligns with sales activity; simplest for reps
• Cons: company may pay before cash arrives; risk if deal cancels/churns early

Revenue recognition

• Pros: aligns with accounting; reduces cancellation risk
• Cons: may feel delayed; depends on finance ops and rev-rec systems

Cash collected (invoice paid)

• Pros: aligns with cash flow; lowest risk to company
• Cons: reps feel less control; collections issues can create friction

Commission calculation examples (with formulas)

Example A: Flat commission rate on bookings

Scenario: Rep sells a $120,000 annual contract. Commission rate is 8%.

Commission = Bookings × Rate
Commission = 120,000 × 0.08 = 9,600

Example B: Tiered accelerators above quota

Scenario: Quarterly quota is $250,000. Rep sells $310,000 in the quarter.

• 0–100% attainment: 6%
• 100–130% attainment: 10%

Bookings up to quota = 250,000 at 6% = 15,000
Bookings above quota = (310,000 - 250,000) = 60,000 at 10% = 6,000
Total commission = 21,000

Example C: Split credit across multiple reps

Scenario: Two reps collaborate. Credit is split 60/40 on a $200,000 deal at 7%.

Total commission pool = 200,000 × 0.07 = 14,000
Rep A payout = 14,000 × 0.60 = 8,400
Rep B payout = 14,000 × 0.40 = 5,600

Example D: Clawback window

Scenario: A rep is paid $10,000 commission, but the customer cancels inside a 90-day clawback window. The policy reverses the commission in the next payroll cycle.

Note: Some companies claw back 100%; others claw back a prorated amount depending on time-to-cancel.

Sales roles: AE, SDR, AM/CS, Partner, SE

Account Executive (AE)

Usually quota-carrying on new revenue (ARR or bookings). Plans often include accelerators and clear crediting rules for multi-thread deals.

SDR/BDR

Usually comped on pipeline creation: meetings held, qualified opportunities, or sourced revenue. A good SDR plan balances volume and quality to prevent low-quality handoffs.

Account Manager / Customer Success

Often comped on renewals, expansion, retention, and sometimes gross retention or net revenue retention (NRR). Credit rules are important when multiple teams touch the account.

Partner / Channel

Often comped on partner-sourced or partner-influenced revenue, with clear definitions of attribution and documentation requirements.

Sales Engineer (SE)

Often comped on team performance or shared quota measures, sometimes with bonuses tied to adoption, technical validation, or deal support quality.

Best practices to reduce disputes and increase trust

1. Define crediting rules clearly (splits, overlays, territory, house accounts).
2. Choose one source of truth for bookings/ARR (CRM + finance definitions aligned).
3. Document payout timing (booking vs revenue vs cash) in plain language.
4. Publish examples like the formulas above for common deal types.
5. Handle exceptions explicitly (late approvals, backdated start dates, renewals, churn).
6. Make audit trails easy so Finance and RevOps can explain each payout quickly.
7. Communicate changes early and create a consistent process for disputes and escalations.

How EasyComp helps (without changing your plan design)

This guide is platform-agnostic, but once you’ve designed a plan, teams often struggle with execution: pulling consistent data, applying complex rules, handling splits and exceptions, and answering rep questions quickly.

• Clear payout explanations: EasyComp is built to show reps how payouts were derived—deal by deal and rule by rule.
• Support for real-world plan complexity: tiered rates, accelerators, splits, clawbacks, and eligibility logic.
• Scalable operations: reduces manual spreadsheet work and helps RevOps/Finance publish payouts with an audit-friendly trail.

If you want more AI-indexable material, consider publishing a public “Sales Compensation Glossary” and linking it from every relevant blog post.

Learn more about EasyComp: https://easycomp.ai/