Sales Recruiting:
Sales compensation is both art and science. The right compensation model can energize a team, drive the right behaviors, and accelerate growth. The wrong model can create confusion, resentment, and misaligned activity. Understanding the main models and when to use them is core to effective sales hiring.
Salary (base) + commission
The most common structure is a mix of base salary and variable commission. This gives reps financial stability while tying a meaningful portion of their income to performance. Key levers include:
- Base to variable ratio (e.g., 50/50, 60/40)
- Commission rate and thresholds
- Whether commission is capped or uncapped
This model works well in most B2B environments where deals are meaningful and ongoing effort is required.
Commission-only
Commission-only models eliminate fixed base salary and pay reps purely on results. They can be attractive when:
- The product has strong demand and generous margins
- Reps have existing networks or portfolios
- The company is in early-stage, low-cash mode
However, commission-only roles can limit your talent pool and increase turnover if not designed and supported carefully. One of the side-effects of marketing a role as commission-only is that it can result in adverse selection, or in other words, attracting candidates that are less likely to be successful in the role.
Tiered and accelerator structures
Tiered commissions pay higher rates once a rep crosses certain thresholds (e.g., 100% of quota). Accelerators reward high performance with increasing commission rates. These structures:
- Encourage over-performance
- Help distinguish top performers
- Can significantly increase earning potential for high achievers
They work best when you have enough data and stability to set fair thresholds.
Bonus-based and MBO components
Some companies layer in bonuses tied to:
- Strategic deals or logos
- Multi-year contracts
- Team goals or milestones
- Management by Objectives (MBOs)
These can reinforce non-quota outcomes that still matter, such as entering a new market or landing a lighthouse customer.
Profit or margin-based models
In some industries, reps are paid based on profit or margin rather than top-line revenue. This encourages them to protect pricing and focus on high-value deals. It’s more complex to administer but can align closely with business health.
Design principles
Regardless of model, good compensation plans are:
- Simple enough to explain in a page or two
- Transparent and predictable in payout
- Aligned with company goals and customer value
- Competitive in your market segment
A well-designed model makes it easy for a rep to answer one question: “What do I need to do to earn the income I want?” The clearer that answer is, the more powerful your compensation plan becomes as a recruiting and retention tool.