Commission plan design is the single most powerful lever revenue leaders have over sales behaviour. A well-designed plan aligns individual incentives with company revenue goals, attracts top performers, and retains them. A poorly designed plan creates sandbagging, deal cherry-picking, territory hoarding, and 30 to 50% annual attrition. In Australia, commission planning carries additional complexity around superannuation obligations, Fringe Benefits Tax, and the cultural expectation of transparent, fair compensation.
This guide covers four commission structures, recommended variable pay ratios by role, ANZ-specific tax and compliance considerations, and templates you can adapt for your team.
The 4 Core Commission Structures
1. Straight Commission (100% Variable)
How it works: Reps earn only when they sell. No base salary. Commission is a fixed percentage of revenue or gross margin.
Example: A rep sells $500,000 in annual contract value with a 10% commission rate and earns $50,000.
Best for: Independent contractor sales agents, real estate, some insurance roles. Rarely appropriate for SaaS or B2B technology sales.
| Pros | Cons |
|---|---|
| Zero fixed cost for employer | Attracts risk-tolerant, not necessarily high-quality reps |
| Unlimited upside for top performers | Creates short-term selling behaviour |
| Simple to administer | High attrition in the first 6 months |
| Difficult to attract candidates in competitive markets |
ANZ consideration: Under the Fair Work Act, employees must receive at least the minimum wage. Contractors on straight commission must genuinely be independent contractors, not employees misclassified to avoid obligations. The ATO scrutinises this arrangement closely.
2. Base Plus Commission (Variable Tied to Revenue)
How it works: A fixed base salary plus a commission on revenue generated. The commission rate may be flat or tiered (increasing at higher attainment levels).
Example: $100,000 base + 8% commission on all closed revenue. A rep closing $1M earns $180,000 total ($100,000 base + $80,000 commission).
Best for: Most B2B sales roles. Provides security while maintaining strong performance incentives.
| Pros | Cons |
|---|---|
| Attracts higher-quality candidates | Higher fixed cost |
| Base provides stability during ramp | Can encourage complacency if base is too high |
| Supports longer sales cycles | Requires careful ratio design |
| Predictable for budgeting | Commission accounting can be complex |
Tiered commission example:
| Attainment | Commission Rate | Revenue Earned | Total Commission |
|---|---|---|---|
| 0 to 80% of quota | 6% | $400,000 | $24,000 |
| 80 to 100% of quota | 10% | $100,000 | $10,000 |
| 100 to 150% of quota | 14% | $250,000 | $35,000 |
| 150%+ of quota | 18% | Uncapped | Uncapped |
Tiered plans create acceleration at higher attainment, rewarding overperformance disproportionately. This is the recommended structure for most AE and enterprise sales roles.
3. Quota-Based Bonus (Variable Tied to Attainment %)
How it works: Instead of commissioning on individual deals, the rep earns a bonus based on their percentage of quota attainment. The bonus is a target amount (e.g., $50,000) paid as a percentage of attainment.
Example: $120,000 base, $60,000 target bonus at 100% attainment. At 85% attainment, the rep earns $120,000 + ($60,000 x 0.85) = $171,000.
Best for: Roles where individual deal attribution is difficult (customer success, solutions consulting, overlay sales), and leadership roles.
| Pros | Cons |
|---|---|
| Simple, easy to understand | Less direct connection between effort and reward |
| Works for non-quota-carrying roles | Can feel arbitrary if quotas are poorly set |
| Easier to budget | Discourages overperformance without accelerators |
| Supports team-based selling |
4. Multiplier/MBO Plans (Variable Tied to Multiple Metrics)
How it works: The variable component is split across multiple objectives, each with its own weight and payout. Objectives can include revenue, pipeline generation, customer retention, product adoption, or strategic initiatives.
Example: $50,000 target variable split as:
Best for: Roles with multi-dimensional responsibilities (CSMs, hybrid hunter/farmer roles, sales leaders). Also used for SDR/BDR plans where you want to incentivise both meetings booked and pipeline generated.
| Pros | Cons |
|---|---|
| Drives multiple behaviours simultaneously | Complex to administer and communicate |
| Reduces gaming of a single metric | Can dilute focus if too many objectives |
| Adaptable to changing priorities | Harder to create "big win" feeling |
| Supports strategic initiatives | Requires strong data infrastructure |
Variable Pay Ratios by Role
The split between base and variable compensation should reflect the role's direct influence on revenue outcomes. Roles with more direct selling responsibility should carry more variable pay.
| Role | Recommended Split (Base/Variable) | Typical OTE (AUD) | Variable Structure |
|---|---|---|---|
| SDR/BDR | 70/30 to 75/25 | $75,000 to $100,000 | MBO: meetings booked + pipeline generated |
| Account Executive (SMB) | 55/45 to 60/40 | $100,000 to $140,000 | Tiered commission on revenue |
| Account Executive (Mid-Market) | 50/50 | $140,000 to $200,000 | Tiered commission with accelerators |
| Account Executive (Enterprise) | 50/50 | $180,000 to $280,000 | Tiered commission, possibly multi-year |
| Account Manager / CSM | 70/30 to 80/20 | $100,000 to $150,000 | Quota-based bonus on retention + expansion |
| Sales Manager | 60/40 to 70/30 | $200,000 to $260,000 | Team quota attainment bonus |
| Head of Sales / VP Sales | 70/30 | $250,000 to $350,000 | Company/team revenue + strategic MBOs |
| CRO | 70/30 to 80/20 | $300,000 to $450,000+ | Company revenue + board-level MBOs |
For detailed salary benchmarks by city and industry, see sales compensation data for APAC.
ANZ-Specific Considerations
Superannuation on Commission
In Australia, the Superannuation Guarantee (currently 11.5% in 2026) applies to Ordinary Time Earnings (OTE). Commission payments that are part of a regular earnings pattern are generally considered OTE and attract super obligations.
Key rules:
Impact on your budget: A $200,000 OTE role with 50/50 split costs an additional $23,000 in super ($200,000 x 11.5%). Factor this into your total cost per rep.
Fringe Benefits Tax (FBT)
If your commission plan includes non-cash benefits (car allowances, phone plans, entertainment budgets), these may trigger FBT obligations at 47% of the grossed-up value. Where possible, include these as salary components rather than fringe benefits.
Fair Work Compliance
Sales Ramp Plans
New hires cannot be expected to hit full quota immediately. A structured ramp plan protects both the company and the rep.
| Month | Quota % | Guarantee Floor |
|---|---|---|
| 1 | 0% | Full OTE guaranteed |
| 2 | 25% | 75% of variable guaranteed |
| 3 | 50% | 50% of variable guaranteed |
| 4 | 75% | No guarantee |
| 5 | 100% | No guarantee |
| 6+ | 100% | No guarantee |
Ramp plans vary by role complexity and sales cycle length. Enterprise reps may need 6 to 9 months to ramp. For a detailed framework, see sales ramp compensation plans.
Commission Plan Templates
Template 1: SDR/BDR MBO Plan
Base: $65,000 | Target Variable: $25,000 | OTE: $90,000
| Metric | Weight | Target | Full Payout |
|---|---|---|---|
| Qualified meetings booked | 50% | 20/month | $12,500 |
| Pipeline generated ($) | 30% | $150,000/month | $7,500 |
| Outbound activity (calls + emails) | 10% | 80 touches/day | $2,500 |
| Data quality (CRM compliance) | 10% | 95%+ compliance | $2,500 |
Accelerator: 1.5x payout on meetings metric above 120% attainment.
Template 2: Mid-Market AE Tiered Commission
Base: $110,000 | Target Variable: $90,000 | OTE: $200,000 | Annual Quota: $1,000,000
| Attainment | Commission Rate | Payout Example |
|---|---|---|
| 0 to 70% | 5% of revenue | $35,000 on $700K |
| 70 to 100% | 12% of incremental revenue | $36,000 on next $300K |
| 100 to 130% | 16% of incremental revenue | $48,000 on next $300K |
| 130%+ | 20% of incremental revenue | Uncapped |
Template 3: Sales Leader Team Bonus
Base: $180,000 | Target Variable: $70,000 | OTE: $250,000
| Metric | Weight | Target | Full Payout |
|---|---|---|---|
| Team revenue attainment | 60% | Team hits 100% of quota | $42,000 |
| Pipeline coverage ratio | 15% | 3x+ pipeline to quota | $10,500 |
| Rep retention (12-month) | 15% | 85%+ retention | $10,500 |
| New hire ramp velocity | 10% | Reps at full productivity by month 5 | $7,000 |
Designing for Usage-Based and PLG Models
Traditional commission plans assume a clear "closed-won" moment. Usage-based pricing and product-led growth (PLG) models complicate this because revenue accrues over time and the buyer may never interact with a rep before purchasing.
For companies with these models, consider:
For detailed guidance on compensating reps in usage-based models, see usage-based compensation frameworks.
Common Commission Plan Mistakes
Mistake 1: Capping Commission
Commission caps tell your best reps to stop selling once they hit the ceiling. Top performers will leave for companies with uncapped plans. If a rep is making "too much," your quota is too low, not your commission rate too high.
Mistake 2: Changing Plans Mid-Year
Nothing destroys trust faster than retroactive changes to commission plans. If you must change a plan, do it at the start of a new quarter with at least 30 days notice, and grandfather existing deals under the old plan.
Mistake 3: Overcomplicating the Plan
If a rep cannot calculate their expected commission on a single deal within 60 seconds, the plan is too complex. Complexity creates confusion, which creates distrust, which creates attrition.
Mistake 4: Ignoring Ramp Period Economics
A new AE generating zero revenue in Month 1 while earning full OTE is not a cost problem; it is an investment. The real cost problem is hiring a rep, giving them no ramp protection, watching them fail, and starting over 6 months later.
Mistake 5: No SPIFFs for Strategic Behaviour
Sometimes you need to change selling behaviour quickly (push a new product, clear end-of-quarter pipeline, drive multi-year deals). Short-term SPIFFs (Sales Performance Incentive Funds) layered on top of the base plan are more effective than restructuring the entire plan. Use the OTE calculator to model different scenarios before committing.