Flat Rate Commission

What is Flat Rate Commission?

Flat rate commission (also called straight-line commission or linear commission) is a compensation structure where salespeople earn the same percentage on every sale—regardless of their total sales volume or quota attainment. Unlike tiered or accelerated structures, flat rate commission provides consistent, predictable earnings calculations. According to Pavilion (2024), 34% of all sales organizations use flat rate as their primary commission model.

Why Companies Use Flat Rate

Flat rate structures offer several advantages:

• Simplicity: Easy to understand, calculate, and explain
• Predictability: Both reps and company can forecast earnings
• Transparency: No confusion about rate changes at different levels
• Reduces gaming: Less incentive to time deals for rate optimization
• Fair for all: Same rate regardless of territory or luck
• Easy administration: Minimal calculation complexity

Calculating Flat Rate Commission

The formula is straightforward:

Commission = Sales Amount × Commission Rate

Example: Basic Flat Rate

Setup:

• Commission rate: 10%
• No quota, threshold, or tiers

Month	Sales	Rate	Commission
January	$75,000	10%	$7,500
February	$120,000	10%	$12,000
March	$45,000	10%	$4,500
Q1 Total	$240,000	10%	$24,000

Example: Flat Rate with Base Salary

Compensation structure:

• Base salary: $60,000/year ($5,000/month)
• Commission: 8% flat rate on all sales
• No cap

Monthly calculation:

• Base salary: $5,000
• Sales: $100,000
• Commission: $100,000 × 8% = $8,000
• Total monthly comp: $13,000

Flat Rate vs. Tiered Commission

Aspect	Flat Rate	Tiered/Accelerated
Complexity	Simple	Complex
Calculation	Single rate × sales	Multiple rates by level
Over-quota incentive	Same rate	Higher rates
Administration	Easy	Requires tracking
Motivation curve	Linear	Exponential over target

Comparison

Same rep, $150,000 in sales, $100,000 quota:

Flat Rate (10%):

• Commission: $150,000 × 10% = $15,000

Tiered Rate (8% to quota, 12% over):

• First $100,000: $100,000 × 8% = $8,000
• Next $50,000: $50,000 × 12% = $6,000
• Total: $14,000

In this case, flat rate actually pays more. According to Gartner (2024), 41% of reps prefer flat rate models due to their predictability.

When Flat Rate Works Best

Ideal scenarios

• Transactional sales: High volume, lower value deals
• New sales teams: Keep plans simple during growth
• Commission-only roles: Where simplicity is paramount
• Equal territories: When opportunities are similar across reps
• Startups: Before enough data exists for complex plans

Industries that use Flat Rates

• Real estate agents (percent of sale price)
• Insurance (percent of premium)
• Recruiting (percent of placement fee)
• Retail (percent of transactions)

Variations of Flat Rate

1. Flat Rate with Threshold

Commission starts only after minimum:

• $0-$25,000: No commission
• $25,000+: 10% on everything above threshold

2. Flat Rate with Cap

Ceiling on total commission:

• 10% flat rate
• Maximum commission: $50,000/quarter

3. Flat Rate with Bonus Kickers

Base flat rate plus milestone bonuses:

• 10% flat on all sales
• $5,000 bonus at $100,000 milestone
• $10,000 bonus at $200,000 milestone

FAQ About Flat Rate Commission

Is flat rate or tiered better?

It depends on your business model. Flat rate suits transactional sales and simplicity. Tiered suits enterprise sales where you want to incentivize overperformance.

How do you set the right rate?

Calculate based on target OTE, expected sales volume, and market data for compensation.

Can flat rate be combined with accelerators?

Yes, many companies use flat rate as the base and add quarterly bonuses or annual kickers to incentivize overperformance.

Configure Flat Rate with Prowi

Flat rate commission offers simplicity and predictability that works well for many sales organizations. With Prowi, you can easily configure flat rate commission, add bonus components, and give reps real-time visibility into their earnings.