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Commission Structures

Identify and apply the right commission structure for each business situation.

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Quiz questions (no-script preview)

A non-cumulative tiered plan has rates 6%/10%/15% for tiers 0-80%/80-100%/100%+. A rep produces $1.1M against a $1M quota. What's the commission?
- $66K
- $83K (correct)
- $110K
- $165K
0.06x$800K + 0.10x$200K + 0.15x$100K = $48K + $20K + $15K = $83K. Each tier rate applies only to revenue inside that tier band - that's the marginal (non-cumulative) approach.
A cumulative (retroactive) plan has 8% <=100% / 14% above. Rep hits $1.2M against $1M quota. What's the commission?
- $96K
- $108K
- $168K (correct)
- $240K
Cumulative tiers retroactively apply the higher rate to all dollars: 14% x $1.2M = $168K. This contrasts with non-cumulative, which would yield ~$108K.
A new SaaS hire gets a $4K/month non-recoverable draw for 6 months. In month 4 they earn $7K commission. What does the rep keep?
- $3K
- $4K
- $7K (correct)
- $11K
A non-recoverable draw acts as a floor - the rep keeps the higher of (commission, draw). At $7K commission > $4K draw, the rep keeps the $7K. (If additive, they'd get $11K - but most non-recoverable draws are 'higher-of'.)
What's the difference between an overlay and a split?
- There is no difference
- Overlay: total credit pool >100% (both reps see full credit). Split: total =100% (credit divided). (correct)
- Splits are for managers only
- Overlays are illegal
Overlays double-credit the deal - both AE and overlay (SE, channel) see 100%. Splits divide credit between co-selling AEs to total 100%. The two structures answer different problems.
A 3-year, $300K TCV deal has $100K ACV. Plan pays 10% on ACV plus 1% TCV-kicker on remaining TCV. What's the rep's commission?
- $10K
- $12K (correct)
- $30K
- $33K
0.10 x $100K (ACV) + 0.01 x $200K (remaining TCV) = $10K + $2K = $12K. The kicker rewards multi-year selling without paying year-1 rates on out-year revenue.
When is a hold-and-release structure preferable to a clawback?
- Always - courts ban clawbacks
- When you want to align rep behavior with retention without recovering paid money later (correct)
- Only for B2C
- When the rep insists
Hold-and-release delays a portion of payout until a contingent event (cash collected, customer retained). It's legally cleaner than recapture, easier to enforce, and avoids the 'why is my paycheck negative?' moment.
A team of 6 AEs each carries $1M quota. Their manager runs on a quota-rollup. The team produces $5.4M. What's the manager's attainment?
- 100%
- 90% (correct)
- 60%
- Cannot be calculated
$5.4M / $6M = 90% manager attainment. Quota-rollup directly aligns the manager's attainment with team output.
A SPIFF pays $500 per qualified discovery call of a new product during Q3. A rep books 6 such calls. The SPIFF earns:
- $0 (SPIFFs are illegal)
- $3,000 (correct)
- $500
- Whatever the manager decides
$500 x 6 = $3,000. SPIFFs are unit-amount x qualifying-events, paid quickly and on top of the recurring plan.
Which commission structure pays based on profit per deal rather than revenue?
- Tiered
- Gross-margin-based (correct)
- SPIFF
- Override
Gross-margin-based commission pays on (revenue - cost), aligning rep economics with company economics and discouraging excessive discounting.
A regional manager earns 1% override on a 6-AE team producing $20M ARR. The override pays:
- $0 - managers don't get overrides
- $200K (correct)
- $2M
- Depends on team attainment
1% x $20M = $200K. Override is additive - the AEs still earn their full commission separately. Modern plans often replace per-rep overrides with quota-rollup mechanisms.

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