Your commission structure determines how much you actually earn — and most sales reps don't fully understand theirs until it's too late. Before you accept any sales job offer, you need to understand exactly how you get paid, when you get paid, and what happens when you miss or exceed quota.
Common Commission Structures
1. Base + Commission (Most Common)
You earn a fixed base salary plus a percentage of the deals you close. The split is typically 50/50 or 60/40 (base/commission) for AE roles, and 70/30 or 80/20 for SDR roles. Example: $80K base + $80K variable = $160K OTE at 50/50.
2. Tiered Commission
Your commission rate increases as you hit higher quota levels. Example: 8% on deals from 0-100% of quota, 12% from 100-150%, 16% above 150%. This rewards overperformance and is common at well-run sales orgs.
3. Uncapped Commission
No ceiling on what you can earn. If you close $5M in a quarter with a 10% rate, you earn $500K in commission. Uncapped plans are the holy grail — but verify 'uncapped' actually means uncapped. Some companies add clawback clauses or quota resets that effectively cap earnings.
4. Draw Against Commission
You receive a guaranteed payment (the draw) that's later deducted from your earned commissions. Recoverable draws must be paid back if you don't earn enough commission. Non-recoverable draws are essentially a guaranteed minimum — much better.
5. Residual / Recurring Commission
You earn ongoing commission as long as the customer stays. Common in insurance, SaaS, and financial services. A rep with 100 clients each paying $1K/month at 5% residual earns $5K/month in passive income. This is how top insurance and SaaS reps build wealth.
Commission Plan Red Flags
- 'Uncapped' with quarterly quota resets that erase overperformance — If quota resets every quarter and there's no accelerator carryover, 'uncapped' is meaningless.
- Clawback clauses — You return commission if a customer churns within 3-12 months. Some clawback is normal, but aggressive clawback policies (12+ months) shift business risk onto reps unfairly.
- Shifting quotas — If the company raises quota every quarter as you hit it, you're on a treadmill. Ask about quota methodology in interviews.
- Complex multi-variable plans — If you need a spreadsheet to figure out your commission, the plan is designed to confuse you. Simple plans (base + % of revenue) are usually better for reps.
- 100% commission with no base — Unless you're experienced and choosing this structure deliberately (e.g., high-ticket real estate), avoid pure commission roles. They attract companies that aren't willing to invest in their sales team.
How to Negotiate Comp
Most candidates only negotiate base salary. Smart candidates negotiate the structure:
- Ask for a non-recoverable draw during ramp (first 3-6 months). This protects you while you build pipeline.
- Negotiate accelerators — The commission rate above 100% quota. This is where real money is made.
- Ask for a quota guarantee in your first quarter. Many companies will prorate or guarantee your first quarter at 75-100% attainment.
- Get the plan in writing before you sign the offer letter. Verbal promises about comp plans are worthless.