Apply / Commission Structures / Tiered Variants
Tiered (Cumulative / Retroactive)
When a rep crosses a tier, the higher rate is applied retroactively to all prior dollars.
Tiered Variants
Advanced
How it works
When the rep crosses a tier threshold, the higher rate is retroactively applied to all dollars from the period start. Generates motivating jumps when the rep hits a milestone, but creates lumpy true-ups and harder accounting. Common in year-end-heavy plans (e.g., "hit annual quota in Q3 and the year retros at the higher rate").
Formula
At end of period: commission = current_rate x cumulative_revenue (retroactive)
Worked example
Example. Tiers: <=100% at 8%, 100%+ at 14%. A rep with $1.2M attainment on $1M quota earns 14% x $1.2M = $168K (vs. ~$108K under non-cumulative tiers).
Pros & cons
Pros
- Highly motivating moment when crossing a tier
- Rewards top performers disproportionately
- Simple final-statement math
Cons
- Lumpy accruals - accounting prefers smooth
- Plan modeling is harder
- Mid-year true-ups frequent
Best for
- Sales teams with annual milestone goals
- Plans aiming to drive year-end push
- Top-performer-centric cultures