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What Is Salary Plus Commission?
Salary plus commission is a popular compensation structure that combines a fixed salary with commission payments based on sales performance. Companies widely use this model to incentivize sales professionals, blending financial security with the motivation to exceed sales goals.
Unlike commission-only or straight commission models, salary plus commission ensures that sales representatives have a reliable base pay while rewarding them for exceptional sales performance. Sales reps receive consistent income each month, plus the opportunity to increase their earnings significantly by meeting or exceeding quotas.
For example, a sales rep might earn a fixed salary of $3,000 per month plus 10% commission on total sales above a monthly quota of $50,000. If the rep generates $70,000 in sales for the month, their earnings would include the $3,000 fixed salary plus an additional $2,000 commission (10% of the $20,000 exceeding the quota), totaling $5,000.
How does salary plus commission work?
Salary plus commission typically includes two core elements:
- Fixed salary (base pay): The stable, predictable portion of a sales representative’s income, paid regularly (e.g., monthly). This provides financial security, reduces stress, and helps retain talented sales reps.
- Variable commission: Additional income calculated as a percentage of total sales generated above a predetermined sales quota. This commission incentivizes reps to surpass expectations, promoting high sales performance and productivity.
Example:
A software sales rep has a base pay of $4,000 per month, with a 12% commission on monthly sales above $60,000. If the sales rep achieves $100,000 in total sales during the month, their earnings are calculated as follows:
- Base salary: $4,000
- Commission earned: 12% of ($100,000 – $60,000) = $4,800
- Total monthly earnings: $8,800
This approach balances income stability with substantial rewards for achieving higher sales.
| Salary + Commission | Commission-Only | Fixed Salary |
|---|---|---|
| Base pay + bonuses | 100% variable | Stable income |
| Balances security/motivation | High earning potential | Low risk |
| Best for most sales roles | Best for closers | Best for support roles |
4 Key Benefits of Salary plus Commission Plans
A salary plus commission compensation structure offers multiple benefits for both sales teams and companies. Some key advantages include:
1. Financial security for sales reps
Unlike commission-only compensation, salary plus commission offers sales professionals financial stability through fixed monthly income. This stability helps attract talented sales representatives who might avoid purely commission-based roles due to uncertainty.
2. Increased motivation and sales performance
Providing commission payments on top of a base salary motivates sales reps to exceed their sales goals. With clearly defined quotas and the possibility of earning higher commission rates, sales teams remain consistently driven and productive.
3. Easier recruitment and retention
Companies offering salary + commission plans typically have better luck recruiting and retaining high-quality sales professionals. Reps appreciate the predictability of base pay combined with unlimited potential for earnings through commission payments.
4. Aligns compensation with company goals
Businesses strategically design commission plans to drive behaviors that align with long-term objectives. WorldatWork’s landmark compensation study found that organizations with dynamic compensation models (like adjustable salary + commission ratios) see 28% higher strategy alignment than rigid plans.
Platforms like Remuner simplify creating customized salary plus commission models, ensuring your comp plans clearly align with your company’s strategic goals.
Disadvantages of salary plus commission plans
Despite its benefits, salary plus commission does present some potential downsides:
1. Increased fixed costs
Companies using salary + commission must manage higher fixed salary expenses. Unlike commission-only plans, businesses carry a financial obligation even if sales performance temporarily declines.
2. Complexity in managing commissions
Effectively managing salary plus commission plans involves accurately calculating and tracking commission payments. Without proper tools, this process quickly becomes time-consuming and prone to error.
Remuner’s automated platform addresses this complexity, providing real-time tracking, transparency, and simplified management of commission payments.
3. Potential for reduced motivation if poorly structured
Poorly structured salary plus commission plans—like excessively high base salaries or unclear commission rates—could potentially decrease motivation. Sales reps may become complacent, focusing less on exceeding quotas if their fixed salary provides too much comfort.
To avoid these disadvantages, companies must carefully design balanced compensation structures and regularly adjust commission plans to maintain high motivation.
Top 4 Industries That Use This Model
Salary plus commission is common in industries where high sales performance directly influences business success, including:
- Technology and software sales: Reps typically have stable base salaries, complemented by commissions linked to total sales or recurring revenue. SaaS reps earn 60Kbase+8100K deal = $8K bonus.
- Automotive sales: Dealership sales reps often have base pay plus commission based on car sales and related products or services. Dealers pay 2K/month+252K/month+255K profit sale = $1,250 commission.
- Insurance: Insurance sales representatives often receive a moderate salary plus commission for selling or renewing insurance policies.
- Real estate agencies: Many real estate agencies use salary + commission, especially for entry-level agents needing financial stability.
How salary plus commission affects sales performance
Salary plus commission positively impacts sales performance by creating clear incentives aligned with sales goals. According to McKinsey’s research on the future of B2B sales teams, hybrid compensation models (like salary + commission) are critical for attracting top talent while maintaining performance accountability in evolving sales environments.
- Goal-oriented behavior: Sales reps focus clearly on achieving and surpassing their quotas, knowing it directly boosts their earnings.
- Higher productivity: Motivated sales professionals consistently engage in proactive selling activities, boosting overall productivity.
- Long-term success: Combining base pay with commission payments encourages long-term thinking, promoting sustainable customer relationships and sales growth.
Best practices to effectively manage salary plus commission
For salary + commission to be effective, businesses should follow these key best practices:
1. Set achievable sales quotas
Realistic sales quotas ensure sales reps remain motivated and consistently strive to exceed expectations. Quotas set too high could demotivate teams, negatively impacting productivity.
2. Clearly communicate commission structures
Transparent communication about base pay, commission rates, and payout timelines helps build trust. Sales representatives perform better when they clearly understand how their compensation structures work.
3. Provide ongoing training and coaching
Regular training improves sales professionals’ skills and confidence. Ongoing coaching helps reps effectively manage challenges, increasing their potential to meet or surpass quotas.
4. Utilize commission management software
Managing salary plus commission manually leads to complexity and potential errors. Platforms like Remuner streamline commission tracking, reduce administrative overhead, and improve transparency, keeping sales teams highly motivated.
FAQs about salary plus commission
What does salary plus commission mean?
Salary plus commission refers to a compensation structure combining fixed monthly income (base pay) with additional variable earnings based on sales performance.
Is salary plus commission better than commission-only?
It depends on the situation. Salary + commission provides financial stability and motivational incentives. Commission-only models can offer higher potential earnings but introduce income uncertainty.
How do companies determine commission rates?
Companies typically set commission rates based on product profitability, industry benchmarks, sales cycle length, and strategic goals, adjusting rates as necessary over time.
How can businesses effectively manage salary plus commission?
Businesses manage these plans best by setting realistic quotas, communicating clearly, offering ongoing training, and using automated compensation software like Remuner.
Conclusion: Is this model right for you?
Salary plus commission offers a balanced compensation approach, blending financial security with performance-based incentives. Businesses should carefully consider the pros and cons, set realistic sales goals, and implement tools like Remuner’s compensation management software to ensure success.
Ready to optimize your salary plus commission structure? Explore how Remuner simplifies commission management, improves transparency, and boosts sales motivation for your teams. Book a Remuner demo today!
