Sales commission structures, explained with numbers.
Four structures cover almost every team under ten reps: a flat rate, a tiered rate, commission on cash collected, and commission on recurring revenue. The choice that matters most is not the rate. It is whether commission is earned on signature or on cash. This guide shows each sales commission structure with numbers, gives you a commission plan template to copy, and explains how to calculate sales commission without a formula nobody trusts.
The four structures.
Every example on this page is made up. Swap in your own numbers.
Flat rate
One rate on every deal. The simplest structure and the easiest to explain on a rep's first day. Made-up example: 10% flat on a $12,000 retainer earns $1,200.
Tiered rate
The rate rises once the rep passes a threshold in the period. Tiered commission rewards the reps who carry the quarter. Made-up example: 8% on the first $50,000 booked, then 12% on everything above it.
On cash collected
Commission is earned when the client's money lands, not when the contract is signed. Instalments earn in pieces. Made-up example: a $6,000 instalment on a $12,000 retainer earns $600 the day it is paid.
On recurring revenue
The usual SaaS sales commission structure. The rep earns a share of each invoice for a fixed window, so churn in month three costs them nine months. Made-up example: 10% of each monthly invoice for the first 12 months.
Signature or cash: the decision that matters.
Paying on signature is simple and it rewards closing. The rep sees the number the day the contract is signed, the statement is easy to read, and nobody waits on an invoice. The cost sits with the business. If the client pays late, pays half, or asks for a refund, you have already paid commission on money that never arrived, and you now have to claw it back from a rep who has spent it.
Paying on cash collected moves that risk back where it belongs. Commission is earned as each payment lands, so a late payer delays the rep's commission rather than creating a debt, and a refund claws back only the share of the money that went out. Clawbacks become rare and small. The trade is patience: a rep who closes a twelve-month retainer in January is paid across the year, not in February. Most small teams accept that trade once they have been burned by the other one.
A plain commission plan template.
Copy these eight fields into a one-page document and fill the right column. If a field is empty, the plan is not finished.
| FIELD | WHAT TO WRITE |
|---|---|
| Rate | The percentage, or the tiers. Example: 10% flat, or 8% to $50,000 and 12% above. |
| Basis (booked or collected) | Whether commission is earned on the signed amount or on cash received. Example: collected. |
| When earned | The event that creates the line on the statement. Example: the day the client's payment lands in Stripe. |
| Clawback rule | What happens on a refund, a dispute or churn. Example: proportional, so a refund of a third claws back a third. |
| Pay period | How often you close and pay. Example: monthly, closed on the fifth of the following month. |
| Coach override | Whether a manager earns a share of a rep's deals, and how much. Example: 2% of the rep's collected revenue, or none. |
| Caps or floors | A ceiling or a minimum per period. Example: no cap, and a floor of zero so a negative month carries forward. |
| Draw | An advance against future commission and how it is recovered. Example: $2,000 a month, recovered from the next three periods. |
Spreadsheet or software.
A commission tracking spreadsheet works while every client pays in full on signature. It breaks the month a client pays in instalments. Now one deal has three payment dates, the rep's rate may have changed between them, and someone has to remember which rows are already paid. Then a refund arrives, the refund row sits next to the original, the deal is counted twice in one tab and once in another, and the totals disagree.
The deeper problem is trust. Once a formula has been patched three times, the rep checks it by hand, the manager checks the rep, and the end of every month becomes a negotiation. Nobody can hand the rep a statement that shows each line with the invoice behind it. Software earns its place when it reads the payments from the source, applies one rule the same way every time, and freezes a period once it is paid, so the question is never reopened.
How LetSign does it.
LetSign keeps one commission plan per workspace, with a flat or tiered rate and a basis of collected or booked. Clawback models cover proportional, cliff, linear, staggered or none. Any rep can carry their own rate override, and a rep's coach earns an override on their deals. Every deal carries one rep, and Stripe subscriptions can be imported as commission contracts.
Pay periods run in a chain. You pay the oldest open one, its numbers freeze, and a later correction lands as an adjustment in the next period. The ledger is reconciled against your own Stripe account, on each webhook and again nightly, so a refund or a dispute claws back without anyone typing a number. Each rep sees only their own workspaces, proposals and earnings statement. This is commission tracking on the Team plan, at $19 per seat per month, with the full rules on the pricing page. The signing and payment side is covered in how to get paid from an AI agent's deal.
Frequently asked questions
Should commission be paid on signature or on cash?
On cash collected, for most small teams. It keeps clawbacks rare and small because commission only goes out on money that has arrived. Pay on signature only when deals are paid in full up front and refunds are almost unknown, and even then write the clawback rule down before the first one happens.
How do I handle refunds?
Decide the clawback rule before the plan goes live and apply it the same way every time. A proportional rule is the fairest: a refund of a third of a payment claws back a third of the commission on it. If the period is already paid, post the clawback as an adjustment in the next one rather than reopening history. The full rules are in the guide to commission clawbacks.
What is a typical SaaS commission rate?
There is no single typical rate. Rates vary with deal size, margin, and whether the rep sources the lead or closes one that marketing handed over, and any number quoted online is someone else's average. Pick yours by working backwards: decide what a rep who hits a realistic target should earn in a year, subtract base pay, and divide the rest by the revenue that target represents. That gives you a rate you can defend.
How do I calculate a tiered commission?
Apply each rate only to the revenue inside its tier, the way tax brackets work. Made-up example: tiers of 8% to $50,000 and 12% above, and a rep collects $70,000 in the period. The first $50,000 earns $4,000 and the next $20,000 earns $2,400, so the total is $6,400. The 12% never applies to the first $50,000.
Can a manager earn a share of a rep's deals?
Yes, and it is usually called a coach override. Set a small rate, often a fraction of the rep's rate, that the manager earns on each deal their rep closes. Keep it separate from the rep's commission so the rep's number never shrinks to fund it. Write it into the plan so nobody discovers it in a statement.
Write the plan once. Pay on what arrived.
Start free, send your first proposals, and switch to Team the day you add a rep. Your clients sign and pay through your Stripe. LetSign keeps the commission ledger straight.