A good commission structure aligns what your salespeople earn with what your business needs, motivating the right behaviour without eroding margin. A poor one rewards the wrong things or feels unfair. Here is how the common structures work and how to design one.
What is a sales commission structure?
A sales commission structure is the way you pay staff based on what they sell. It links pay to performance, so the more (or better) someone sells, the more they earn — turning effort into a shared win.
Common commission structures
| Structure | How it works |
|---|---|
| Straight commission | Pay is purely a percentage of sales, no base |
| Base + commission | A fixed wage plus a percentage of sales |
| Tiered | Commission rate rises as sales pass targets |
| Bonus / target | A lump sum for hitting a goal |
How to design a commission plan
- Align it to your goals — reward margin or priority lines, not just volume, so commission does not encourage heavy discounting.
- Keep it simple — staff should be able to work out their commission easily.
- Make it fair and achievable — targets that motivate rather than demoralise.
- Balance base and commission — enough security plus real upside.
Calculating commission
Commission is typically a percentage of sales value — or better, of margin, so it does not reward unprofitable discounting. Whichever you choose, base it on accurate sales data attributed to each salesperson.
Best practices
Review the plan periodically, watch that it drives the behaviour you want (not just more sales at any cost), and pay it accurately and on time through payroll.
Track sales and commission accurately
RushFlow attributes sales to staff and tracks the numbers your commission plan depends on, so payouts are accurate, transparent, and easy to run each period.