Compensation plan is a document that defines the complete pay structure for an employee or role. It specifies all elements of total compensation including base salary, variable pay, commissions, bonuses, benefits, and equity. According to WorldatWork (2024), companies with well-documented compensation plans have 41% lower turnover among salespeople.
A compensation plan is one of the most powerful tools for driving business results:
According to Pavilion (2024), sales organizations spend an average of 3-5% of revenue on variable compensation.
| Component | Description | Typical share |
|---|---|---|
| Base salary | Fixed pay regardless of performance | 40-70% of OTE |
| Commission | Variable pay tied to sales results | 20-50% of OTE |
| Bonus | Lump sum for achieving specific goals | 5-20% of OTE |
| SPIFs | Short-term incentives for specific behavior | Variable |
| Accelerators | Elevated rates above quota | 1.5-3x base rate |
| Type | Description | Best for |
|---|---|---|
| Salary only | 100% fixed pay with no variable | Customer Success, support |
| Commission only | 100% variable based on sales | Freelancers, brokers |
| Base + commission | Combination of fixed and variable | Most B2B sales roles |
| Base + bonus | Fixed pay plus periodic bonuses | Account Management |
| Tiered commission | Increasing rates at higher attainment | Mature sales organizations |
| Element | Value |
|---|---|
| OTE | $135,000 |
| Base salary | $67,500 (50%) |
| Variable target | $67,500 (50%) |
| Annual quota | $675,000 ARR |
| Commission rate | 10% of ARR |
| Accelerator (100-150%) | 15% (1.5x) |
| Accelerator (150%+) | 20% (2x) |
| Attainment | Base | Commission | Total |
|---|---|---|---|
| 80% | $67,500 | $54,000 | $121,500 |
| 100% | $67,500 | $67,500 | $135,000 |
| 120% | $67,500 | $87,750 | $155,250 |
| 150% | $67,500 | $118,125 | $185,625 |
| Aspect | Compensation Plan | Commission Plan |
|---|---|---|
| Focus | Total compensation | Variable commission only |
| Includes | Base + commission + benefits | Rates, quotas, accelerators |
| Audience | All employees | Salespeople |
| Mistake | Consequence | Solution |
|---|---|---|
| Too complex | Reps can't optimize behavior | Limit to 2-3 metrics |
| Unrealistic quotas | Demotivated team | Data-driven quota setting |
| No accelerators | Top performers leave | Add 1.5-2x rates above quota |
| Frequent changes | Lost trust, confusion | Annual cycles, no mid-year changes |
For B2B SaaS, 50/50 to 60/40 (base/variable) is standard. Enterprise roles often have more base pay, while transactional roles can be 30/70.
60-70% should achieve quota. Fewer indicates quotas are too high or territories are unbalanced. More means you're leaving money on the table.
Annually is standard. Avoid mid-year changes as they create uncertainty and can be perceived as unfair.
Compensation plans in spreadsheets create errors, disputes, and administrative work. With Prowi, you automate plan administration, real-time commission tracking, and performance visibility—so your team always knows where they stand.