How to Design a Sales Commission Plan That Motivates
- No invented stats
- Written for UK readers
- 5 min read
- Published 4 November 2026
A commission plan is a set of instructions. Whatever it pays for is what you will get, including the parts you did not intend. Before you tune rates, decide what behaviour you are buying — then check the plan cannot be satisfied in a way that damages the business.
Start with the four numbers
Every plan rests on four figures, in this order:
- OTE — on-target earnings. Total pay if the rep hits 100% of target.
- Split — how OTE divides between base and variable.
- Quota — the revenue number that triggers 100% of variable pay.
- Rate — the commission percentage that makes the arithmetic work.
Many teams set the rate first, which is backwards and produces plans that pay out either absurdly or not at all.
Illustrative UK figures
The ranges below are illustrative planning anchors, not survey data — they vary enormously by sector, location and deal size, and you should check your own market before using them.
| Role | Typical base (illustrative) | Typical OTE (illustrative) | Common split |
|---|---|---|---|
| SDR | £26,000–£34,000 | £34,000–£46,000 | 70/30 or 80/20 |
| Account executive | £35,000–£55,000 | £65,000–£100,000 | 50/50 or 60/40 |
| Account manager | £32,000–£48,000 | £45,000–£70,000 | 70/30 |
| Sales manager | £50,000–£70,000 | £75,000–£110,000 | 70/30 |
The principle behind the splits matters more than the numbers. The more control a rep has over the outcome, the more variable the pay should be. An SDR who books meetings but does not close them should not be on 50/50, because most of what determines revenue is out of their hands.
Worked example: setting the rate
An AE on £80,000 OTE, split 60/40. Base £48,000, variable £32,000. Annual quota £640,000 of new business.
Commission rate = variable pay ÷ quota
£32,000 ÷ £640,000 = 5%.
Check the affordability from the other direction. Total cost of this rep at target is £80,000 plus employer's National Insurance, pension and overheads — as a rough planning figure, around 1.25 to 1.3 times OTE, so roughly £100,000–£104,000. Against £640,000 of revenue, that is a cost of sale around 16%. Whether that works depends entirely on your gross margin: comfortable at 70% margin, impossible at 20%.
The quota-to-OTE ratio is the sanity check. Here it is 8:1. As a rough rule of thumb rather than a benchmark, a ratio much below about 4:1 usually means the rep cannot be afforded; much above 10:1 and the rate becomes so thin that individual deals stop feeling worth the effort. You can test variations quickly with the sales commission calculator.
Accelerators and decelerators
A flat rate pays the same for the deal that takes you to 60% of quota and the one that takes you to 140%. Accelerators fix that.
| Attainment | Rate | Commission on £640,000 quota |
|---|---|---|
| 0–70% | 3.5% | Up to £15,680 |
| 70–100% | 6.5% | £12,480 for this band |
| 100–130% | 9% | £17,280 for this band |
| Above 130% | 11% |
At exactly 100%, total commission is £15,680 + £12,480 = £28,160, slightly under the £32,000 target — so in a real plan you would tune the middle band upward until 100% attainment pays exactly the intended variable. Do that arithmetic before publishing; a plan where hitting target does not pay target destroys trust immediately.
Two honest cautions on accelerators. They reward luck as well as skill, so a rep who lands one unusually large deal can earn a great deal for a quarter that says little about performance. And caps, which are the obvious remedy, are usually a mistake: a rep who hits the cap in November stops selling until January and moves deals into next year. If you are worried about a windfall, use a decelerating band above some very high attainment rather than a hard cap, and say so in the plan.
What to pay on
- Revenue — simple, everyone understands it, and it quietly encourages discounting to get deals over the line.
- Gross profit — better aligned to the business, protects margin, but harder to explain and sometimes exposes cost data you would rather not share.
- Margin-linked rate — a middle path. Pay the full rate on deals at list price, a reduced rate on discounted ones. If a 10% discount cuts the commission rate from 6% to 4%, discounting stops being free for the rep. The discount impact calculator shows what a price cut really costs, which is worth showing the team.
- New versus renewal — pay less on renewals than on new business, or you are paying full freight for revenue that was always going to arrive.
Timing and clawbacks
Pay on cash collected rather than contract signed if you have any exposure to bad debt, and say so explicitly in the plan. Common UK arrangements:
- On invoice — motivating, but you can pay commission on revenue you never receive.
- On payment — safer, and reps end up caring about credit checks and payment terms, which is no bad thing.
- Split — half on signature, half on payment. A reasonable compromise.
Clawbacks should exist, be narrow, and be written down: typically if a customer cancels or fails to pay within a defined window, for example 90 to 180 days. A broad, vague clawback clause is a reliable way to lose good reps, and clawing back pay months later has employment-law and payroll implications — get any clawback wording checked before it goes into a contract.
Plan designs that cause bad behaviour
- Paying on bookings with no margin floor. You will get volume at whatever price closes it.
- Hard caps. Reps stop working or park deals in the next period.
- Quota that only ever rises. Each good year makes next year harder, and eventually your best rep leaves — the reasoning is set out in the case against targets that only go up.
- Too many components. If a rep cannot calculate their own commission on the back of an envelope, it will not motivate them, whatever it pays.
- Retrospective changes mid-year. The fastest way to make a plan worthless is to alter it after the work is done.
- Team-only bonuses on small teams. With three reps, one underperformer removes everyone's upside, and resentment follows.
A five-step build
- Write the one behaviour the plan must produce this year — new logos, margin, retention. One, not four.
- Set OTE against your local market and the split against how much control the role has.
- Set quota from capacity, not from ambition: work back from realistic pipeline creation and win rates rather than dividing the board's target by headcount. The sales target calculator is designed for exactly that.
- Derive the rate, then check the quota-to-OTE ratio and cost of sale against margin.
- Model three scenarios — 60%, 100% and 140% attainment — and ask whether you are happy paying each outcome. If 140% frightens you, fix it now rather than in December.
Publish the plan in writing before the period starts, with worked examples, and leave it alone until the period ends.
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