SaaS sales compensation has to account for a business model where the value of a deal extends well beyond the initial sale. New business matters, but so do recurring revenue, expansion, retention, and the quality of the customers brought in. The way you structure commissions can influence how sales reps balance those priorities.
That makes designing a SaaS sales commission structure more complicated than simply choosing a commission rate. The plan has to support the company’s revenue goals while giving reps clear, attainable incentives that reflect the work they’re actually being asked to do.
In this guide, we’ll look at the key considerations that go into building a SaaS sales commission structure and how companies can approach plan design as their sales strategy and business evolve.
How is each member of a SaaS sales team compensated?
A typical SaaS sales organization is made up of a variety roles that contribute to revenue in different ways. While some positions are directly responsible for closing new business, others focus on generating opportunities, growing existing accounts, or supporting longer-term customer relationships. Compensation structures should reflect those differences rather than applying the same incentives across the entire sales organization.
Let’s look at typical sales roles, the ways they may be compensated, and the considerations that shape each approach.
How are Sales Development Representatives (SDRs) compensated?
Sales Development Representatives (SDRs) are typically responsible for generating and qualifying opportunities for Account Executives (AEs) or other members of a sales team.
An SDRs day-to-day work often includes outbound calls, emails, LinkedIn outreach, and/or following up with inbound leads. Because the role is based largely around completed activities and can involve a lot of repetition and rejection, compensation should give SDRs clear incentives tied to the outcomes they can meaningfully influence.
Most SDR commission pay structures combine a base salary with an element of variable pay tied to one or more of the following:
1. Activity-Based Compensation
Some companies include activity targets in an SDR compensation plan, particularly when the team is still building consistent prospecting habits or testing a new outbound motion. Examples might include:
- Responding to inbound leads within a defined timeframe
- Completing a target number of calls
- Sending a target number of personalized emails
- Completing a defined number of prospecting touches
Activity metrics can help establish expectations, but they should be used carefully. Paying too heavily on volume can encourage SDRs to prioritize quantity over the quality of their outreach.
2. Qualified Meeting or Opportunity Compensation
A common approach is to compensate SDRs based on the number of qualified meetings or opportunities they generate. This moves the incentive closer to pipeline creation and gives reps a reason to focus on prospects that meet the company’s qualification criteria.
Companies should clearly define what counts as a qualified meeting or opportunity before tying compensation to it. Otherwise, disagreements over lead quality, no-shows, or sales acceptance can quickly create confusion.
3. Pipeline or Closed-Revenue Compensation
Some SaaS companies tie a portion of SDR variable compensation to the value of the pipeline or revenue they source. For example, an SDR might earn a percentage of annual contract value (ACV) or annual recurring revenue (ARR) when a sourced opportunity closes.
This can create stronger alignment between SDRs and the broader sales organization, but it also introduces factors outside the SDR’s control. For that reason, closed-revenue incentives are often used as one component of the plan rather than the sole measure of SDR performance.
Recommended reading: The Top Sales Compensation Consulting Firms in the United States.
How are Account Executives (AEs) or sales representatives compensated?
Account Executives (AEs) (sometimes just referred to as sales reps) are typically responsible for turning qualified opportunities into closed business. Unlike SDRs, whose compensation often focuses on pipeline generation, AE sales incentive compensation is generally more closely tied to the revenue they generate.
Most SaaS companies use a combination of base salary and variable compensation, with the variable portion determined by performance against a sales quota.
There are several ways SaaS companies can structure AE commissions depending on their sales model, deal structure, and business priorities:
1. Quota-Based Commission
Most AEs carry a revenue quota tied to a defined period, such as a month, quarter, or year. Their commission earnings correlate with how much of that quota they achieve, typically based on metrics such as annual contract value (ACV), annual recurring revenue (ARR), or another measure of booked revenue.
A clear quota gives reps a defined performance target and allows companies to align commission opportunities with broader revenue goals.
2. Commission Rates and Accelerators
AEs may earn a set commission rate on the revenue they close, with the opportunity to earn higher rates once they exceed quota. These higher rates, often called accelerators, reward overperformance and give top-performing reps an incentive to continue selling after reaching their target.
Some plans also use different commission rates based on the type of revenue generated, such as new business, expansion revenue, or multi-year contracts.
3. Bonuses and Other Incentives
Companies may supplement standard commissions with bonuses or other incentives tied to specific business priorities. These can reward performance such as reaching a particular quota threshold, selling a strategic product, or achieving another defined objective.
These incentives can give companies additional flexibility without requiring them to redesign the core AE commission structure every time priorities change.
Recommended reading: The Ultimate Guide to Account Manager Commission Structures.
How are Sales Managers compensated?
Sales managers are responsible for team performance rather than an individual book of business. Their target compensation typically reflects that broader responsibility, with variable pay tied to team results and, in some cases, additional goals related to the performance and development of the sales organization.
There are several ways SaaS companies can structure sales manager compensation depending on the size of the team, the manager’s responsibilities, and the company’s sales model:
1. Team Quota Attainment
A significant portion of a sales manager’s variable compensation is often tied to the team’s performance against its collective revenue quota. This creates a direct incentive for managers to coach reps, address performance issues, and help the team consistently generate revenue.
Companies may calculate attainment using the combined quotas of the manager’s reps or establish a separate team-level target.
2. Overrides on Team Sales
Some sales managers earn a commission override based on the revenue generated by the reps they manage. The manager receives a smaller percentage of eligible sales in addition to the commissions earned by individual reps.
Overrides can align a manager’s earnings with overall team production while giving them an incentive to improve performance across the entire team rather than concentrating on a small number of individual deals.
3. Bonuses and Additional Performance Goals
Sales managers may also earn bonuses tied to goals beyond revenue attainment. Depending on the role, these could include objectives related to pipeline generation, forecast accuracy, rep productivity, or other priorities the manager can directly influence.
These measures should remain secondary to the manager’s core responsibilities and be clearly defined so managers understand how each component contributes to their variable compensation.
Recommended reading: Is a Commission-Only Job Right for You?
How are VPs of Sales compensated?
A VP of Sales is responsible for the performance of the broader sales organization, so their compensation is typically tied to company-level or organizational revenue goals rather than individual deals. Their on-target earnings (OTE) often includes a higher base salary and a meaningful variable component designed to reward overall sales performance and progress against the company’s growth targets.
There are several ways SaaS companies can structure VP of Sales compensation depending on the executive’s responsibilities, company stage, and revenue strategy:
1. Company or Sales Organization Quota Attainment
A significant portion of a VP of Sales’ variable compensation is typically tied to the sales organization’s performance against a revenue target. Depending on the business, that target might be based on new ARR, total bookings, or another company-level revenue metric.
Tying compensation to an organization-wide target keeps the VP focused on the performance of the entire sales function, including the systems, processes, and team required to reach the company’s revenue goals.
2. Performance-Based Incentives
A portion of variable compensation may be tied to additional performance goals within the VP’s control. These goals can reflect priorities such as improving forecast accuracy, building sufficient pipeline coverage, increasing sales productivity, or successfully expanding the sales organization.
These incentives should be limited to measurable priorities that are important to the business rather than creating a long list of secondary objectives that compete with the VP’s primary revenue responsibility.
3. Equity and Long-Term Incentives
Equity or other long-term incentives are often a more significant part of compensation for a VP of Sales than for individual contributors or frontline managers. The size and structure of the equity component can vary considerably based on company stage, ownership structure, and the executive’s role.
Long-term incentives can help align the VP’s compensation with the sustained growth and value of the company, complementing variable compensation tied to shorter-term sales performance.
Recommended reading: Comparing ICM Solutions: Variabl vs. Xactly.
How are Sales Engineers compensated?
Sales Engineers (SEs) support the sales process by providing the technical expertise needed to evaluate a product, demonstrate how it meets a prospect’s requirements, and address technical questions during the buying process. Because they contribute to deals without typically owning the final close, their compensation tends to place more emphasis on base salary than roles such as Account Executives.
There are several ways SaaS companies can structure Sales Engineer compensation depending on the role’s responsibilities, sales process, and level of influence over revenue:
1. Team or Regional Quota Attainment
A portion of an SE’s variable compensation is often tied to the performance of the sales team, territory, or region they support. Rather than earning a commission on every individual deal, the SE earns variable compensation based on how the broader group performs against its revenue target.
This approach recognizes the SE’s contribution to revenue while accounting for the fact that they may support multiple Account Executives and opportunities at the same time.
2. Individual or Deal-Based Incentives
Some companies tie a portion of Sales Engineer compensation to individual performance or specific deals. An SE might receive credit for revenue from opportunities they supported or earn an incentive when those opportunities close.
Deal-based incentives can create a more direct connection between an SE’s work and their earnings, but companies should avoid structures that encourage SEs to prioritize certain opportunities at the expense of the broader team.
3. Performance-Based Goals
Sales Engineers may also have variable compensation tied to goals beyond closed revenue. Depending on their responsibilities, these might account for technical evaluations, proof-of-concept success, sales enablement, or other measurable contributions to the sales process.
These goals should focus on outcomes the SE can meaningfully influence and complement, rather than outweigh, the revenue component of their compensation.
Recommended reading: Pharmaceutical Sales Commission Structures (Key Insights).
How are Sales Operations or RevOps professionals compensated?
Sales Operations professionals support the systems, processes, data, and planning that allow a sales organization to operate effectively. While their work can have a significant impact on revenue, they typically don’t own individual deals or directly control whether a sale closes. As a result, Sales Ops compensation generally relies more heavily on base salary than traditional sales roles, with variable compensation used selectively.
There are several ways SaaS companies can structure Sales Ops compensation depending on the scope and seniority of the role:
1. Base Salary
Base salary typically makes up the majority of compensation for Sales Ops roles. Unlike Account Executives or other quota-carrying positions, Sales Ops professionals generally aren’t paid a commission on the revenue generated by the sales team.
This reflects the nature of the role. Sales Ops influences sales performance through areas such as process, technology, reporting, territory design, and planning, but many of the factors that ultimately determine revenue fall outside their direct control.
2. Company or Team Performance Bonuses
Some companies include a variable component tied to broader company or sales organization performance. For example, a Sales Ops professional might receive a bonus based in part on the sales team reaching its overall revenue target.
Keeping these incentives at the team or company level can recognize Sales Ops’ contribution to revenue without holding the role accountable for individual deals or rep performance.
3. Individual Performance Goals
Variable compensation may also be tied to specific goals within the Sales Ops team’s control. These goals will depend heavily on the responsibilities of the role but might relate to improving data quality, completing strategic projects, supporting planning cycles, or increasing the efficiency of key sales processes.
When individual goals are included, they should be measurable and tied to outcomes rather than simply rewarding the completion of routine responsibilities. This keeps performance incentives focused on improvements that meaningfully support the sales organization.
Recommended reading: The Best Ways to Calculate Commission: Simple Steps and Examples.
Final Thoughts
A SaaS sales commission structure shouldn’t be treated as a static set of rates and quotas. As a company changes, the work required to generate revenue changes with it. New products, different customer segments, longer sales cycles, expansion strategies, and changes to the sales organization can all shift which behaviors are most valuable to the business.
That makes compensation an ongoing source of information, not just a way to calculate payouts. Consistent over-performance or underperformance, unexpected earning patterns, frequent exceptions, and disagreements about credit can reveal problems with quotas, role design, territories, or the assumptions behind the plan itself. Companies that pay attention to those signals can identify issues that might otherwise show up later as missed targets or frustrated sales teams.
The strongest commission structures leave room to evolve without becoming unpredictable. Reviewing plans regularly and making deliberate changes as the business grows can help keep incentives aligned with what the company actually needs from its sales organization.
