This is the simplest commission model there is, and it works across products, categories, and industries.
The model is especially useful when you don’t have historical or anecdotal data to build a plan on. However, watch out for high costs if your sales team performs strongly relative to your available liquidity.
If you are looking for a commission plan that can be implemented quickly, understood intuitively, and scaled without drama, a flat rate is a strong starting point. You define a percentage that applies to all qualified deals and tie it to a clear measurement point. When a rep closes a deal, they can see immediately what it is worth. When a manager looks at the pipeline, they can budget without opening a spreadsheet. When Finance runs payroll, they can reconcile amounts and documentation without sending five emails back and forth. It is a plan that makes it easy to choose a direction before you start fine-tuning.
The core is simple. A percentage of a clearly defined value is paid every time a deal meets the plan’s criteria. In practice this means you choose what triggers commission and which value the calculation is based on. For SaaS, it will often be first-year ARR at the moment of Closed Won. In project businesses, it can be invoiced revenue once the invoice is paid. In models with large discounts or varying margins, it can be contribution margin to ensure that behavior stays healthy.
A flat rate works because it removes doubt. Reps can calculate the numbers themselves. Managers can shift focus from exceptions to pipeline quality. Finance can plan cash flow because payout follows a rule, not a negotiation. You get fewer interpretation debates and more energy spent on generating revenue.
The plan fits when you need to get started quickly or when your business has a certain uniformity. It could be a new sales function, a new market, a new product, or a team that needs a clear framework to grow in. It may also be that you tried a complex plan and realized the administrative burden did not match the benefit. A flat rate is not a downgrade. It is a deliberate choice for transparency while you learn more about your business.
This does not mean a flat rate is naive. You can still control quality. It is about defining what counts and in what order. Does the order need to be approved. Must the invoice be paid. Must the customer be active for at least 90 days. Should discounts above a certain level require approval if they are still to be commissionable. You can set these guardrails without making the actual calculation opaque.
Start with the signal that matters most in your business. ARR gives a strong link to growth and is easy to understand in a subscription model. Invoiced revenue is obvious if liquidity is the priority or if you want to avoid paying for value that has not yet been realized. Contribution margin is relevant when margins vary widely or when sales heavily influence delivery economics. The point is not to find the perfect truth on day one but to choose a measurement point that supports the behavior you want now. Once you have better data, you can switch or refine.
Work backward from OTE and quota. If an AE has a variable pay of DKK 450,000 and an annual quota of DKK 4.5 million ARR, an average rate of 10 percent will get them to target at 100 percent attainment. If you have history, factor in hit rate, discounts, and deal size. If you do not, choose a rate that allows a strong rep to reach the variable without depending on a single mega deal. It sounds basic, but many plans fail here. The rate gets decided in a meeting, not in data. The result is unpredictable payout, mistrust, and slower pace.
Imagine a quarterly quota of DKK 1.8 million ARR and a flat rate of 10 percent of first-year ARR. When the rep closes a DKK 300,000 deal, they know the variable payout is DKK 30,000, assuming the plan specifies Closed Won and approval as criteria. If they close six similar deals, they end up with DKK 1.8 million ARR and DKK 180,000 in variable pay. The math is clear. The manager can spend energy on pipeline quality and momentum, not on explaining why a kicker triggers here but not there.
A classic objection to a flat rate is that it does not reward the last 20 percent extra. That can be true, and you can solve it without giving up simplicity. The most common solution is a simple accelerator that raises the rate above 100 percent attainment. For example, 12 or 15 percent above target. It is still transparent. It can be explained on one slide. And it motivates the reps who can truly move the top line in the last weeks of the period.
A flat rate can create skewed incentives if deal sizes vary wildly. It is healthy to define a per-deal cap or move the calculation to net revenue. A cap is not a punishment. It protects the plan economics so you do not overpay for a single atypical deal. Conversely, you can define a minimum so very small deals do not create unnecessary administration. Both can be described briefly in the plan and both can be automated.
Your plan does not become strong by having many rules. It becomes strong by having the right rules. A simple set of qualification criteria can go a long way. You can require that the contract is recorded correctly in the CRM, that product and price match the price book, that discounts above X percent are approved, that the customer is onboarded, and that the invoice is paid. When those criteria are met, commission is paid. When they are not, it is not. When you describe this clearly, the number of debates drops dramatically.
Reality is rarely linear. Customers can change an agreement, cancel, or be credited. It is crucial that corrections do not become an Excel project. A flat rate must tolerate adjustments without losing control. In Prowi, calculations follow your data sources. When a deal changes status or value, the system calculates the required correction, shows the difference to the employee, and includes the adjustment in the next payroll run. That creates peace of mind and maintains trust in the plan even when something goes the wrong way.
A good plan is not just a calculation. It is also documentation, approvals, and auditability. This means rules, rates, and qualification criteria should live in one place, approvals should be logged, and history should be easy to retrieve during audit. The employee should be able to see why a specific payout looks the way it does. The manager should approve with insight into what changed since the last run. Finance should be able to export a clean file to payroll where every line can be explained.
Setup follows a simple rhythm. You create the plan and select a period. You choose the measurement point and define the rate and any qualification criteria. You assign the plan to the relevant roles and teams. From there, Prowi calculates commission in real time based on your CRM and invoicing data. The employee sees the expected payout in the app, the manager reviews and approves, and Finance sends the file to payroll. When data changes, the calculations follow. When a customer churns, the clawback is calculated automatically and displayed clearly so surprises do not arise.
If you need momentum, want a plan your reps can remember without opening a manual, and want to steer behavior with a few clear rules, then yes. A flat rate is a smart first version. When you have more data, you can build on it with an accelerator, move the measurement point to net revenue, or add a per-deal cap. You do not need to choose complexity to be serious. Choose transparency to gain speed.
After a couple of cycles you know more. Perhaps you see margin getting eroded by discounts. Then move the measurement point from ARR to net revenue. Perhaps you notice two reps driving 70 percent of growth. Then add a simple accelerator above 100 percent attainment. Perhaps you have a product area where delivery is complex. Then add a requirement that onboarding must be completed before payout is released. All three changes are small in operations but large in effect. They adjust behavior without making the plan opaque.
Read also: OTE calculator for sales teams
See related: Corrections and clawbacks made simple
A Singe Rate commission plan is the fastest path to a reliable, credible compensation setup. It creates clarity for reps, predictability for leadership, and clean operations for Finance. It can be implemented quickly, explained in minutes, and adjusted without losing the overview. When you want to refine behavior, add a simple layer on top in the form of an accelerator, a margin guard, or a per-deal cap. You start simple, build momentum, and use data to decide where the next improvement should be.
Want to see how a flat rate looks with your own numbers. Book a short demo and we will set up a trial plan on your CRM data, show real-time calculations, and generate a payroll file ready for payout.