09 Sep 2026
Sales compensation is directly tied to performance, execution, and real-world results. Your commission plan dictates exactly how much you take home as an SDR or AE, when those earnings hit your bank account, and which milestones count toward your paycheck. Understanding these mechanics is the first step to unlocking your full earning potential and taking command of your financial future in tech sales.
At SV Academy, we train sales talent for tech sales careers and help employers hire trained SDRs. Our approach includes role-specific training and ongoing support, and our graduates have ranked among the top 10% of SDR performers.
In this piece, we’ll break down how sales commission structures work, what SDRs and AEs can expect, and the common ways companies calculate commission.
A sales commission structure defines how sales professionals earn variable pay based on their performance. It usually combines a base salary with commissions tied to specific sales goals or results.
SDRs may earn commissions for qualified meetings, opportunities, or pipeline generated, while AEs are often paid based on closed deals or revenue. Learn more in our Sales Development Representative Salary Guide and What Is an Account Executive?.
A clear commission plan outlines targets, payout rates, and payment timing. This gives sales professionals a straightforward way to understand how their performance affects their earnings.
SDRs and AEs typically earn commissions based on different parts of the sales process. Their compensation reflects the responsibilities each role has, from creating opportunities to closing deals:
SDRs often earn a base salary plus variable pay tied to qualified meetings, opportunities, or pipeline created. Plans may also include bonuses for reaching specific targets.
AEs commonly earn commissions based on closed deals or revenue. Their plans may include a base salary, commission rate, and additional incentives for exceeding sales targets.
A strong commission plan should be easy to understand and aligned with the responsibilities of each sales role. The right structure can motivate performance while giving reps a clear view of how their work affects their earnings:
Define specific goals for each role, such as qualified meetings for SDRs or closed revenue for AEs. Targets should be realistic and measurable.
Set rates based on the role, sales cycle, deal value, and company goals. The plan should reward strong performance without making payouts difficult to predict.
Explain when commissions are earned and paid, including how cancellations, refunds, or missed targets affect compensation. Clear rules help reps understand exactly what to expect.
Different commission plans can fit different sales teams and goals. Common approaches include flat-rate commissions, revenue-based plans, and structures that increase payouts as reps exceed their targets:
A rep earns a set percentage of the revenue from each qualifying sale. This approach is simple and easy to calculate.
Commission is tied directly to the value of closed deals. A higher deal value generally results in a higher payout.
A tiered plan increases the commission rate after a rep reaches certain sales targets. For example, a rep might earn one rate up to quota and a higher rate after exceeding it.
A clear sales rep commission structure connects compensation to measurable performance. SDRs and AEs may have different targets, but both benefit from plans that are simple, transparent, and aligned with their responsibilities.
The best commission plans give reps a clear and straightforward understanding of how their work translates into earnings. Companies should review these plans regularly to keep targets, rates, and incentives relevant as their sales strategy changes.
Commission is usually tied directly to sales performance, while a bonus is often a fixed payment based on achieving a specific goal, milestone, or company result.
It depends on the company’s compensation policy. Some companies pay commissions monthly, while others use quarterly schedules or pay after a deal has been collected.
Yes. Some companies set a maximum commission amount, although uncapped plans are also common. The choice depends on the company’s goals and compensation philosophy.
A commission plan may include a clawback policy that requires some or all of the commission to be returned when a customer cancels, receives a refund, or fails to pay.
They can be. Commission rates may be discussed during hiring or when compensation plans are reviewed, although companies often use standardized plans for similar roles.
Yes. Commission is generally treated as taxable income. The amount withheld depends on factors such as location, total earnings, and applicable tax rules.
Yes. A plan can use different rates for different products, customer types, deal sizes, or performance levels.
A draw is an advance against expected future commissions. Depending on the plan, it may need to be repaid if the salesperson does not generate enough commission.
Many companies review plans at least annually. A review can help identify issues with targets, payout rules, or incentives as business priorities change.
It can. A compensation plan that employees understand and view as attainable may support motivation and retention, while unclear or inconsistent plans can create frustration.
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