Sales Compensation Plan

# Sales Compensation Plan — [Role Name]

**Effective date:** [DATE]
**Plan year:** [YYYY]
**Owner:** [Sales lead / CEO]

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## 1. Role + on-target earnings

| Field | Value |
|---|---|
| Role | [Account Executive / SDR / Senior AE / etc.] |
| Reports to | [Name] |
| Base salary | $[X] |
| Variable target | $[Y] |
| **On-target earnings (OTE)** | $[X + Y] |
| Variable as % of OTE | [Typically 40-50% for AE, 20-30% for SDR] |

## 2. Quota

| Period | Quota |
|---|---|
| Annual | $[N] of net new ARR |
| Quarterly | $[N/4] |
| Monthly | $[N/12] |

**Pacing:** quota is expected to be hit linearly through the year. Q1 is typically lighter for new hires (see ramp below).

## 3. Variable comp structure

Variable comp is earned by closing deals. Paid monthly, in arrears, based on the prior month's closed-won deals.

### Commission rates (linear within band)

| Achievement (% of quarterly quota) | Commission rate |
|---|---|
| 0 - 50% | [N]% of closed-won ARR |
| 50 - 100% | [N+1]% of closed-won ARR |
| 100 - 150% | [N+3]% of closed-won ARR (accelerator) |
| Above 150% | [N+5]% of closed-won ARR (super-accelerator) |

### Bonuses (optional)

| Trigger | Bonus |
|---|---|
| First closed-won deal | $[X] one-off |
| 100% of annual quota by end of Q4 | $[X] |
| 150% of annual quota | $[X] |

## 4. Ramp period (new hires)

| Month | Quota expectation | Comp guarantee |
|---|---|---|
| Month 1 | None — onboarding | 100% of variable target |
| Month 2 | 25% of normal quota | 75% of variable target |
| Month 3 | 50% of normal quota | 50% of variable target |
| Month 4+ | 100% of normal quota | Pure commission |

## 5. Claw-back

Commission earned on a deal is subject to claw-back if:
- The customer cancels within [60/90/120] days of closing
- The customer materially defaults on payment (>30 days late) within [N] months
- The deal is later discovered to be misrepresented

Claw-back is applied as a deduction against future commission payments. No interest. No retroactive base salary adjustment.

## 6. Definitions

- **Closed-won:** signed contract + first invoice paid OR fully-paid PO
- **Net new ARR:** annualised committed contract value minus any churn from the rep's existing book
- **Quota credit:** ARR is credited to the rep who owned the opportunity at the time it was closed
- **Split deals:** when multiple reps work on the same deal, quota credit and commission are split [50/50 / case-by-case]

## 7. Termination

- Voluntary resignation: all commission earned and not yet paid is paid out in the final paycheck
- Termination for cause: commission earned but not yet paid is forfeit
- Termination without cause: commission earned and not yet paid is paid out within 30 days

## 8. Plan review

This plan is reviewed annually. Changes are not retroactive. Any change to commission rates or quota is communicated at least 30 days before taking effect, and only at the start of a new quarter.

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**Signature:**

Salesperson: __________________________ Date: ___________

Manager: __________________________ Date: ___________

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**Educational only — not legal or tax advice.** Sales compensation plans should be reviewed by employment counsel in your jurisdiction before signing. Different jurisdictions have different rules around commission claw-back, post-termination payments, and minimum-wage interactions.