Sales Compensation Plan Modeler

Model different compensation plan scenarios. Compare tiered commission structures.

Base Salary (AUD)Fixed annual

Annual Quota (AUD)Revenue target

Tier 1 Threshold (%)First tier start

Tier 1 Rate (%)Below tier 2

Tier 2 Threshold (%)Base tier (quota)

Tier 2 Rate (%)At quota

Tier 3 Rate (%)Above quota (accelerator)

Earnings at Different Attainment Levels

Attainment	Revenue	Commission	Total Earnings	Eff. Rate
50%	$250,000.00	$20,000.00	$100,000.00	8.0%
75%	$375,000.00	$37,500.00	$117,500.00	10.0%
100%	$500,000.00	$50,000.00	$130,000.00	10.0%
125%	$625,000.00	$68,750.00	$148,750.00	11.0%
150%	$750,000.00	$87,500.00	$167,500.00	11.7%

On-Target Earnings (100% Quota)

$130,000.00

$80,000.00 base + $50,000.00 commission

Plan Design Insights

• Tiered plans incentivize hitting thresholds

• Accelerators (Tier 3) reward top performers

• 50-60% of reps should hit 100% quota

• Lower tiers prevent total earnings collapse

• Model multiple scenarios before finalizing plan

How to Model Sales Compensation Plans

Sales compensation plan modeling helps you design fair, motivating comp structures before rolling them out. Test different scenarios to understand earnings at various performance levels.

Common Compensation Plan Structures

Flat Rate Plan

Same commission rate on all revenue (e.g., 10% on everything)

Tiered Plan

Different rates at different quota attainment levels

Accelerator Plan

Higher rate above quota (e.g., 10% up to quota, 15% above)

Decelerator Plan

Lower rate above certain threshold (rare, discourages over-performance)

Tiered Plan Design Best Practices

Tier 1 (0-75% quota): Reduced rate (60-80% of base rate) to discourage sustained underperformance
Tier 2 (75-100% quota): Base commission rate, standard OTE calculation
Tier 3 (100%+ quota): Accelerated rate (1.5-2x base) to reward top performers
Sweet Spot: 50-60% of reps should comfortably reach Tier 2/3

Key Metrics to Model

OTE (On-Target Earnings): Total comp at 100% quota
Earnings at 50%: What underperformers make (should still be livable)
Earnings at 150%: What top performers can earn (should be compelling)
Effective Commission Rate: Actual % paid at each attainment level
Company Cost: Total comp cost as % of revenue at different levels

How to Test Your Comp Plan

Model Historical Performance: Apply new plan to last year's results
Calculate Rep Distribution: What % of reps land in each tier?
Check Competitiveness: Compare OTE to market benchmarks
Test Edge Cases: What happens at 0%, 50%, 200% attainment?
Measure Motivation: Does the plan incentivize desired behaviors?
Verify Affordability: Can the business sustain comp costs?

Common Plan Design Mistakes

Too Complex: Reps can't calculate their earnings easily
Unrealistic Quotas: Less than 40% hit target (demotivating)
No Accelerators: No reward for exceeding quota (caps performance)
Hard Caps: Limits earnings potential (kills motivation)
Frequent Changes: Changing plans mid-year erodes trust
Misaligned Incentives: Rewarding wrong behaviors (e.g., discounting)

Comp Plan Red Flags

Watch for these warning signs:

Less than 40% of reps hitting quota (quota too high or plan broken)
Top performers leaving (insufficient upside or comp not competitive)
Sandbagging (reps holding deals to next period - quota/timing issue)
Heavy discounting (commission rewards volume over margin)
Churning customers (commission paid upfront without clawback)

Frequently Asked Questions

What are tiered commission plans?

Tiered plans pay different commission rates at different performance levels. Example: 8% below 75% quota, 10% at 75-100% quota, 15% above 100% quota. Benefits: incentivize hitting thresholds, reward top performers with accelerators, prevent earnings collapse for struggling reps. Downsides: more complex to administer and explain. Use tiers to align rep behavior with business goals.

How should I set commission tiers?

Set tiers based on: Tier 1 (50-75% quota): Lower rate to discourage underperformance but provide some income. Tier 2 (75-100% quota): Base rate, standard commission. Tier 3 (100%+ quota): Accelerator (1.5-2x base rate) to reward over-achievement. Ensure 50-60% of reps can hit Tier 2/3. Test multiple scenarios before implementing. Align tier thresholds with business milestones (breakeven, profitability).

Should I cap commission earnings?

Avoid caps if possible - they demotivate top performers and limit revenue growth. Exceptions: new product launches (unknown demand), channel conflict concerns, or profitability constraints. If you must cap: set it high (200-300% of target commission), communicate clearly why, and review annually. Better alternatives: adjust quota upward or reduce commission rate at extreme over-performance (150%+ quota) rather than hard cap.