Payout Frequency

What is Payout Frequency?

Payout frequency defines how often earned commission is paid out to salespeople. The most common frequencies are monthly, quarterly, or per deal. The choice of frequency affects rep motivation, company cash flow, and administrative workload. According to WorldatWork (2024), 78% of salespeople prefer monthly payouts.

Why Payout Frequency Matters

The right payout frequency balances several considerations:

• Rep motivation: More frequent payouts reinforce the connection between performance and reward
• Cash flow: Reps prefer predictable income for personal financial planning
• Administrative burden: More frequent payouts require more processing
• Accuracy: Longer periods allow time for deal verification
• Clawback risk: Paying too quickly increases reversal risk

According to Pavilion (2024), monthly payouts increase rep satisfaction by 34% compared to quarterly.

Common Payout Frequencies

Frequency	Typical Use	Advantages	Disadvantages
Monthly	Most B2B organizations	Good balance, predictable	Moderate admin
Quarterly	Enterprise sales	Time for verification	Long wait time
Per deal	Transactional sales	Immediate reward	Unpredictable income
Upon customer payment	Services/consulting	Matches cash flow	Variable timing

Example: Payout Timeline

Monthly Payout

Step	Date	Action
1	January 15	Deal closes - commission earned
2	January 31	Commission period ends
3	February 5	Calculations finalized
4	February 10	Manager approval
5	February 15	Payout processed

Lag time: 30 days from deal close to payout.

Factors Affecting Frequency Choice

Sales cycle length

• Short cycle (< 30 days): Monthly or per deal works well
• Medium cycle (1-3 months): Monthly is standard
• Long cycle (3+ months): Consider quarterly with monthly draws

Customer payment terms

• Net 30: Monthly payout is realistic
• Net 60-90: Consider payout upon customer payment
• Annual prepaid: Can pay immediately at booking

Commission plan complexity

• Simple flat rate: Frequent payouts are feasible
• Complex tiered/accelerated: Longer periods for accurate calculation

Hybrid Payout Models

Many companies combine approaches:

Model	Description	Example
Split payout	Divided at booking and payment	50% at close, 50% at customer payment
Advance + true-up	Monthly estimate, quarterly reconciliation	Monthly advance, quarterly true-up
Base + bonus	Different frequency per component	Monthly commission, quarterly bonus

Best Practices for Payout Frequency

Prioritize predictability: Reps should always know exactly when they'll get paid.

Document cutoff dates: Clear rules for when deals count in which period.

Provide visibility between payouts: Real-time tracking of earned commission.

Align with payroll: Integration with payroll system simplifies tax processing.

FAQ About Payout Frequency

Which frequency do reps prefer?

According to WorldatWork (2024), 78% prefer monthly payouts. Only 12% prefer quarterly.

How are clawbacks handled with monthly payouts?

Clawbacks are typically offset against the next payout. For large amounts, they may be spread over multiple periods.

Can payout frequency change mid-year?

Yes, but requires clear communication and should take effect at the next period start to avoid confusion.

Automate Payouts with Prowi

Manual payout handling is time-consuming and error-prone. With Prowi, you can configure any payout frequency, automate calculations, and give reps real-time visibility into their earned and upcoming payouts.