Commission

Sales is work where the same hours produce wildly different results. One team holds the person who closes thirty deals in a quarter and the person who closes three. Pay both a flat salary and their paychecks match, and the one closing thirty doesn't stay long.

There was a problem on the company's side too. Growing a sales team means the salary cost goes out first, and whether a given hire produces revenue isn't known for months. Hire ten, watch six of them miss, and those six are a straight loss.

So pay got split into two pieces. Enough to live on is fixed, and the rest tracks the revenue the person actually brings in. Strong performers take home far more than a flat salary would have paid them, and the company spends less in months when nothing closes.

Who owns the rules was unsettled for a while. It's pay, so it looks like a people function; it's attached to revenue, so it looks like a sales function. These days it usually sits with whoever looks after revenue processes end to end. One line in the rules changes what a rep does that same day, which makes it inseparable from setting targets and defining deal stages.

Multiply the value of a closed contract by a rate agreed in advance. Close a $15,000 contract at a 10 percent rate and the payout is $1,500.

The numbers usually get set in this order.

1. Annual total compensation comes first. It's base salary plus the commission target, and it's the figure quoted during hiring. A $50,000 base with a $50,000 commission target makes total compensation $100,000. A half-and-half split is common, and the closer a role sits to signing contracts, the heavier the commission side gets.
2. A quota is attached. A quota is the revenue target assigned to one rep. If the annual quota in the example above is $500,000, the rate is set at 10 percent so that hitting the target exactly produces the $50,000 commission target. The rate is derived backward like this.
3. Decide whether to add accelerators. Anything above quota earns a higher rate — 15 percent past the 100 percent mark, for instance. It exists to stop people from coasting the moment the target is met.
4. Decide when it pays. On signature, after the invoice goes out, or after the money actually arrives — all three are used. Signature is fastest for the rep and leaves the company exposed to paying out on contracts that never get collected.
5. Write down the conditions for taking it back. If a customer cancels within a few months of signing, the payout already made gets recovered. Without that clause, closing a customer who clearly won't last is still the profitable move for the rep.

Steps 4 and 5 are where disputes concentrate. Reps feel it's unfair to have pay delayed by things outside their control, and companies dislike sending money out against revenue that hasn't landed. So the rules ship with worked examples attached rather than prose alone.

Commission rules decide where a rep spends their hours, immediately. That's why they get reopened almost any time the sales system is adjusted.

The first decision is what the payout attaches to. Attach it only to new contracts and nobody looks after renewals from existing customers. Attach it purely to contract value and reps lean toward discounting to the floor of the discount policy to land a larger deal — which is why many companies pair it with a clause that drops the rate once the discount passes a threshold.

What it attaches to also varies by role. An SDR, whose job is creating meetings, gets paid on meetings booked or on how many of those turned into real deals, while an account executive (AE) carrying the contract gets paid on value. The split exists because the two control different things.

Redrawing territories opens the rules too. A territory is the region or customer range assigned to a rep, and redrawing one changes who owns deals already in flight. Move the boundaries without touching the commission rules and the first argument is about who gets paid for those deals.

It also meshes with the handoff that follows a signature. Pay everything out at signing and what happens after the handoff stops being the rep's concern; hold part of it until renewal and the handoff notes get written far more carefully.

"This one's at a 30 percent discount, so the commission rate drops a tier."

The rule tying discounts to payouts doing its job. The rep gives up part of their share in proportion to what the customer saved.

"We pay on collection, so it won't land this month — it'll come next month."

The deal closed but the money hasn't arrived, so the payout is deferred.

"Past quota you're into accelerators, so the same size deal pays more."

Anything above target earns a higher rate.

At Pagedeck the rules covering Sofia, who handles enterprise contracts, were rewritten last quarter. Until then commission attached only to new contracts, and as one-year customers started reaching their end dates it became clear nobody was working renewals. Renewals now pay at half the new-business rate, and from the following quarter a pattern appeared of reaching out two months before expiry.

Grace treated the change as a question of priority rather than cost. If keeping an existing customer is cheaper than finding a new one, the commission rules should be pointing at that order.

It's easy to assume that paying more makes people sell more. The money tracks results, so raising the rate seems like it should raise the output. What actually changes behavior is the shape of the rules rather than the size of the rate. A high rate that a rep can't turn into a number on the spot — "what does this deal pay me?" — doesn't influence what they do. Under a plan with five layers of conditions, reps stop thinking about commission entirely and get surprised by the statement at quarter end.

The other misreading is that this stays inside the sales organization. It's part of payroll, so it looks like something between people ops and sales. But what the payout attaches to decides which customers come in, and that decides what those customers ask the product for. A team that pays heavily on large deals is six months later full of enterprise accounts, and the product team is holding the feature list those accounts demanded. That's why someone outside sales should read the rules before they change.