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    Sales teams rely on commissions to stay motivated and perform well. While standard commissions reward individual sales, an overriding commission gives extra earnings to sales managers and team leaders based on their team’s performance.

    This compensation model encourages leadership, team development, and higher overall sales performance. But how does it work, and is it right for your business?

    Let’s break it down in simple terms.

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    Discover Sales Leaders main concerns when defining commissions and variable remuneration.

    • How do we ensure that the goals of sales teams align with those of the company?
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    • How can we maintain high levels of motivation?

     

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    What Is an Overriding Commission in Sales?

    An overriding commission is an extra commission that managers, supervisors, or senior sales professionals earn based on the sales their team makes.

    Unlike regular commissions, which sales reps earn from their direct sales, this commission rewards leaders for mentoring and developing their team members.

    Example of an Overriding Commission:

    A company sets a 5% override commission for sales managers.

    • If a sales rep closes a deal worth $10,000, their manager gets an extra $500 as an override (5% of $10,000).
    • The rep still keeps their standard commission.

    This system motivates leaders to support their team, helping everyone sell more and meet their sales quota faster.

    How Does an Overriding Commission Work? (With examples)

    An overriding commission can be based on:

    1. A percentage of total sales revenue
      • Example: A manager earns 3% of all sales generated by their team.
    2. A percentage of total commission paid
      • Example: If a rep earns $5,000 in commission, their manager gets 10% of that ($500).
    3. A tiered system
      • Example:
        • 2% override for team sales up to $100,000
        • 4% override for sales above $100,000

    This structure incentivizes managers to help their team close more deals and improve sales performance.

    Top 5 Benefits of Overriding Commissions for Sales Teams

    1. Encourages Strong Leadership

    Managers who benefit financially from their team’s success will invest more time in coaching, training, and supporting their reps.

    2. Increases Sales Volume

    Since leaders earn from their team’s performance, they focus on growing total revenue instead of just personal deals.

    3. Attracts and Retains Top Talent

    Offering extra commission makes leadership positions more attractive and encourages experienced reps to stay with the company.

    4. Improves Team Collaboration

    A manager’s earnings depend on team performance, so they are more likely to share strategies and help weaker reps succeed.

    5. Provides a Clear Growth Path

    Sales reps see a future in leadership roles, knowing they can earn more through team-based incentives.

    Challenges of Overriding Commissions (And How to Overcome Them) 

    Despite its benefits, this system has some downsides.

    1. High Costs for Businesses

    Paying extra commission on top of regular commissions can increase payroll expenses.

    2. Less Focus on Individual Sales

    Managers may prioritize team coaching over their personal sales, which could reduce their direct contribution.

    3. Potential Conflicts

    If multiple managers oversee the same team, deciding how to split commission can cause disputes.

    4. Over-Reliance on Top Performers

    If a few top sales reps leave, their team leader’s earnings drop significantly, impacting retention.

    To avoid these issues, companies should set clear commission rules and use sales tracking tools like Remuner to automate and manage payouts.

    When Should a Company Use Overriding Commissions?

    This structure works best when:

    ✔ Managers actively support sales reps – If leaders help close deals, they should be rewarded for team growth.

    ✔ Sales involve teamwork – Industries where multiple reps work on a deal (like real estate or insurance) benefit from team-based commissions.

    ✔ Businesses need strong mentorship – If retaining and developing talent is a priority, rewarding leaders for coaching makes sense.

    ✔ Companies want to encourage long-term growth – Managers will invest in training new hires, knowing their earnings increase as the team improves.

    A recent HubSpot 2024 Sales Trends Report reveals that compensation structures play a critical role in sales team motivation and performance, with businesses increasingly adopting team-based incentives like overriding commissions to drive collaboration and revenue growth. Read the full report here.

    Examples of Overriding Commission in Different Industries

    1. Software Sales (SaaS)

    • A SaaS company gives 2% override commission to team leads based on the revenue their reps generate.
    • If a sales team closes $500,000 in deals, the lead earns $10,000 in extra commission.

    2. Real Estate

    • A real estate firm pays brokers a fixed override of $1,500 per property sold by agents under their supervision.

    3. Insurance Sales

    • An insurance agency provides managers with a tiered commission structure:
      • 2% override on policies up to $200,000
      • 4% override on sales beyond $200,000

    5 Best Practices for Managing Overriding Commissions

    ✔ Set Clear Override Percentages – Define exactly how much managers earn from team sales.

    ✔ Adjust Sales Quotas Accordingly – Ensure OTE (on-target earnings) are fair for both managers and reps.

    ✔ Use Compensation Software – Automate tracking, reporting, and payouts to avoid errors and disputes.

    ✔ Balance Team and Individual Goals – Ensure leaders stay motivated to sell while mentoring their teams.

    ✔ Monitor Performance Regularly – Use real-time tracking to measure sales growth and adjust commissions as needed.

    For businesses looking to automate and optimize their compensation plans, Remuner offers a powerful commission tracking system to manage overrides accurately.

    Ready to streamline your sales compensation plans? Discover how Remuner’s commission tracking software can help you manage overriding commissions with ease. Start your free trial today!

    FAQs About Overriding Commissions

    How is an overriding commission calculated?

    It is usually a fixed percentage of total sales or total commissions earned by a team.

    Who receives overriding commissions?

    Typically, sales managers, team leaders, or senior sales professionals responsible for mentoring and developing a team.

    How is it different from standard commissions?

    Standard commissions reward individual sales, while overriding commissions reward managers based on their team’s success.

    Can multiple managers receive an override on the same sale?

    Yes, but businesses must define clear commission structures to avoid double payments or conflicts.

    How do companies track overriding commissions?

    Using compensation management software like Remuner, businesses can automate calculations, monitor team performance, and manage payouts efficiently.