What should a sales commission plan include?

Who it covers, the rate, what counts as a sale, when it's paid, what happens when a customer cancels, how to raise a question, and both signatures. The template has a line for each.

How do I calculate sales commission?

Multiply the sales that count by the rate. With an accelerator, pay the normal rate up to quota and the higher rate on everything above it. The free sales commission calculator shows each step.

What commission rate should I pay?

Work it back from pay. Decide the commission a rep should earn at quota, then divide it by the quota: $1,000 on a $12,500 quota is 8%.

On-target earnings: the base salary plus the commission a rep earns at 100% of quota.

Should commission be paid when a deal is signed or when it's paid?

Paid is safer if customers pay late or cancel often, and signed is simpler for the rep. Whichever you pick, write it down and pair it with a clawback period.

What is a commission clawback?

Commission taken back when a customer cancels or doesn't pay within a set time. Write the time limit into the plan, and take back only what was paid on that deal.

Can I change a commission plan partway through the year?

Yes, in writing and with notice before the month it applies to. Changing it mid-month, or backdating it, is how a team stops trusting the plan.

Does it work in Excel or Google Sheets?

Yes. Fill in the rate, the quota and the accelerator, and the months table works out each month's attainment and commission. To use Google Sheets, upload it to Google Drive and open it there.

Is the template free?

Yes. Copy it, print it or download it. There's no sign-up and no form to fill in.

ActivityTracker

Free template for sales managers and founders

Sales commission plan template: one page your reps can check their pay against

The rates, what counts, when it's paid, clawbacks and sign-off on one page, with a months table that works out the commission in Excel. Copy it, print it or download it for Word or Excel. Free, no sign-up.

Most commission arguments start with a plan that was never written down, or one that ran to twelve pages nobody read. This one fits on a page. The plan in one sentence goes at the top, so every rep can say how they're paid. Under it go the rules that cause the arguments: when a deal counts, when it's paid and what happens when a customer cancels. You and the rep both sign it before the first month starts.

Your commission plan, on one page

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Sales commission plan: [team or role]

Plan period: [from] to [to] Written: ______ Next review: ______

The plan in one sentence

You earn [rate] on [what counts], paid [when], and [the higher rate] on everything above quota.

Who it covers

Roles: ____________

A new rep's first months: ____________ (e.g. half the quota for the first two)

Pay

Base salary a month: ______

Target commission a month: ______

On-target earnings a month: ______ (base plus target commission)

Quota a month: ______

The rates

Commission rate up to quota (%): __

Accelerator above quota: __ (1.5 means one and a half times the rate)

Rate above quota (%): __

Most a month can pay: ______ (blank means no cap)

What counts

A deal counts when: ____________ (signed, invoiced or paid)

Commission is worked out on: ____________ (the first year's contract value, the invoice or the margin)

Deals that don't count: ____________

Two reps on one deal: ____________

When it's paid

Paid on: ____________ (e.g. the 15th of the next month)

The statement lists each deal, its value and its commission, and goes out on: ______

Clawbacks

Clawback period in days: __ (if a customer cancels or doesn't pay within it, the commission on that deal comes off the next payout)

Leaving: deals that counted before the last day are paid on: ____________

Questions and changes

Days to raise a question about a payout: __

Who to raise it with: ____________

Notice before the plan changes, in days: __ (changes are made in writing)

The months

Month	Sales	Attainment (%)	Commission
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec

Signed

Rep: ______ Date: ______

Manager: ______ Date: ______

Work out one payout with the free sales commission calculator

How to fill in the plan in an afternoon

Start from what a rep should earn, and work back to the rate.

Set on-target earnings first: the base plus the commission a rep earns at quota
Divide the target commission by the quota to get the rate: $1,000 on $12,500 is 8%
Pick the day a deal counts, and choose paid over signed if customers pay late
Write the plan in one sentence, then fill in the rest
Sign it with each rep before the period starts

Five rules that stop commission arguments

Most disputes come from something the plan didn't say.

A deal counts on one date, written down: signed, invoiced or paid
Every statement lists each deal, its value and its commission
A clawback has a time limit and takes back only what was paid on that deal
A question about a payout has a deadline and a named person to ask
The plan changes only in writing, with notice before the month it applies to

How the commission is calculated in three months of a filled-in plan

Jordan Reyes, account executive at a payroll software company. Written 2 January, checked 15 April. The names and numbers are made up.

Pay: $4,000 base and $1,000 target commission a month, so on-target earnings are $5,000.
Quota: $12,500 a month of first-year contract value at 8%, so a month at quota pays $1,000.
Above quota: an accelerator of 1.5, so every dollar past $12,500 pays 12%. No cap.
A deal counts when the customer pays the first invoice, and commission is paid on the 15th of the next month.
January: $10,000 in sales, 80% of quota, paid $800.
February: $12,500, 100% of quota, paid $1,000.
March: $15,000, 120% of quota, paid $1,000 on the first $12,500 and $300 on the $2,500 above it, so $1,300.
In April a $2,000 February customer cancelled inside the 90-day clawback, so $160 came off May's payout.

The plan adds up: $4,000 + $1,000 = $5,000. $12,500 x 8% = $1,000. $10,000 x 8% = $800. $2,500 x 12% = $300, and $1,000 + $300 = $1,300. $2,000 x 8% = $160.

Which commission structure fits a small team

Pick one. Two structures stacked on each other is where reps stop being able to check their pay.

Flat rate
One rate on every deal. Fits a first rep or a simple product. It pays the same for the deal you want and the one you don't.
Rate with an accelerator
A higher rate on everything above quota. Fits a team where quota is reachable. If quota is set too high, the accelerator never pays.
Tiered
Rates that step up at set amounts. Fits reps with very different deal sizes. Keep it to three tiers, or nobody can check the maths.
Base plus commission
A salary with a lower rate on top. Fits long sales cycles, where months go by between deals.
Draw against commission
An advance each month, paid back from commission. Fits a new rep ramping up. Write down whether the draw has to be paid back.

The words, in the glossary: OTE, quota and SPIFF. The free OTE calculator and quota calculator do the sums.

Let reps see the month's number before payday

The template is free. ActivityTracker, the app we make, is paid. It doesn't run payroll or work out commission. It shows each rep where the month stands against their target while there's still time to change it.

Put the year's number in as a goal, and see what each month still needs
On track, at risk or off track, against where you should be by today
The leaderboard starts again every Monday, with each rep's own target beside their score

See how goals work

Questions

Let every rep see where the month stands before payday

The template is free to use. The app is paid and shows each rep's month against target while it can still change.

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