Essential Commissions & Incentive Plans You Must Know How to Use for Sales Success Using Compass

Keeping your sales team motivated is no small feat. While many assume sales reps are only driven by money, the reality is that they, like all employees, seek purpose, recognition, and fairness in their work.

A well-designed sales incentive plan is one of the most powerful tools to inspire performance, retain top talent, and drive business growth.  

However, many companies struggle with ineffective incentive structures. Outdated processes, unclear rewards, and demotivating systems can lead to disengagement, turnover, and missed revenue opportunities.

In this guide, we’ll explore the essential building blocks of a successful sales incentive plan that your sales reps will love—and how Compass can help you simplify and optimize the process. 

Why incentivize and compensate the salespeople? 

Salespeople were paid by incentives for centuries before economists began writing about the principal-agent problem. Companies chose this system for at least three reasons. First, it’s easy to measure the short-term output of a salesperson.

Second, sales reps have traditionally worked with little supervision since incentive-based pay gives managers some control, making up for their inability to know if a rep is actually working or playing golf. Third, studies of personality type show that salespeople typically have a larger appetite for risk than other workers, so a pay plan that incentivizes this appeals to them. 

But why don’t most sales commission plans work? 

Many sales commission plans fail to deliver the desired results due to common pitfalls. Here are five reasons why: 

1. One-size-fits-all approach – Every sales team is different, yet many companies use the same commission structure for all sales reps. A customized plan tailored to different roles and goals leads to better performance. 
2. Compensation ratio is not optimized – If the balance between fixed salary and commission isn’t right, it can either demotivate sales reps or lead to unhealthy competition. Sales commission plans must be structured to encourage sustainable success. 
3. Payouts are consistently delayed – Timely commission payouts are crucial for keeping sales reps engaged. When payments are delayed, motivation drops, and trust in the system erodes. 
4. Only top performers are motivated – Many sales commissions plans only reward high achievers, leaving mid-level performers disengaged. A well-designed plan should incentivize all levels of sales reps to drive overall team success. 
5. No intermediate recognition – Small wins matter. Without intermediate rewards, sales reps may lose momentum before reaching big targets. Recognizing progress along the way keeps motivation high. 

A well-structured sales commission plan ensures fairness, clarity, and motivation, ultimately driving better sales results.  

Beyond a basic salary, organizations must explore additional ways to motivate their sales teams. Instead of relying solely on motivational speeches, implementing a structured incentive program can drive performance, enhance engagement, and align sales efforts with business goals. 

An effective commissions & incentive plan encourages positive behaviors, sets clear expectations, and ensures every sales team member contributes to individual, team, and organizational success.

However, the difference between incentive and commission is essential to understand—while commissions reward direct sales achievements, incentives can be structured around broader performance metrics.  

Now that you know the significance of incentive, and commission of the sales representatives, following are the commission-based incentive plans you must know. 

Types of commission-based incentive plans offered by Compass 

There should be an Incentive plan for every member of the sales team based on their organization, resources, goals, role, experience, length of the sales cycle, and the type of deals they engage in. Here are some other factors to consider while curating a program for the employees: 

1. Target-based incentives 

Target-based incentive plans focus on achieving predefined goals at different timeframes: 

• Daily targets: Encourages completion of specific objectives, such as sales volume or customer retention rates, to support long-term business growth. Assigning territories, setting quotas, and tracking daily achievements help drive consistency. 
• Short-term targets (weekly/fortnightly/monthly): Competitions offering rewards for meeting short-term goals—such as a prize for top-performing reps at the end of a week or month—create excitement and drive immediate results. 
• Long-tenure targets (quarterly/yearly): Long-term incentives, like work trips or milestone bonuses, recognize sustained high performance and contribute to long-term revenue growth. 

2. Competition-based incentives 

Sales contests foster a healthy competitive environment while aligning with business goals. There are three primary types: 

• Direct competition: Sales reps compete against each other, with a single winner based on performance. 
• Team competition: Groups work together to achieve collective goals, fostering teamwork and collaboration. 
• Goal-based competitions: Sales teams or individuals earn rewards for meeting specific performance milestones, such as increasing revenue during peak seasons. 

3. Cascading programs 

These programs ensure that all sales reps, regardless of performance levels, have a structured pathway to improvement: 

• High performer programs: Designed for top-tier salespeople, providing exclusive rewards and ensuring they stay motivated. 
• Programs for tail-end performers (PIP programs): Performance improvement plans outline clear goals, growth metrics, and strategies to help struggling sales reps enhance their productivity. 

4. Special incentive schemes 

To maximize motivation, businesses should offer diverse commission-based incentive plans that cater to different performance levels and strategic goals: 

• Specific KPI-based programs: Specific KPI (Key Performance Indicators) -based Programs help set award rules and to analyze the success of your program. You can integrate your channel incentive program with your other business platforms to streamline admin and improve user experience. 
• Seasonal programs: Limited-time bonuses and rewards during peak sales periods (e.g., Black Friday, holiday sales) encourage aggressive sales efforts. 
• Opportunistic programs (stock clearance incentives): Short-term contests designed to push excess inventory or maximize end-of-quarter sales. 
• Special incentive scheme: Employers can offer a combination of incentives based on sales numbers, productivity and other predetermined standards depending on their business goals. 

This program includes all possible types of Incentives schemes. 

Incentive-based schemes available on Compass 

These sales contests are ways to incentivize high performance among your salespeople. These tactics are often used to change behavior and include monetary (such as a $500 cash prize to the first rep who closes 10 deals of a certain product) or non-monetary (a nice dinner for every team that increases their retention rate by the benchmark percentage). 

1. Sales performance incentive funds (SPIFs) 

A SPIF is generally a short-term sales incentive used to drive immediate results. SPIFs are often considered in compensation planning but are not always mapped out. Rather, they are often spontaneous incentives that boost performance and sales over a short period of time. 

When sales leadership decides to implement a SPIF, they choose a particular product range or service to focus on. These choices could be to build momentum in sales or increasing opportunities in the market. These sales programs would be needed to be completed within a specified time period. 

2. Channel Incentive & Loyalty Program 

Channel partners are an intrinsic constituent of the distribution strategy for a brand. We can help design, implement and manage incentive & loyalty programs for distributors, wholesalers, Stuckists, retailers and key influencers. These programs not only help to increase sales but also create the right environment upon which to build meaningful and mutually profitable partnerships. 

3. Behavior-based rewards 

Behavior based rewards are run to motivate the salespeople to do more of a particular activity - like increasing the number of client meetings, sales documentations, etc. 

4. Influencer Loyalty Program 

Most products follow a multilevel route to market and the importance of influencers in moving the product to the next stage and to an eventual sale. Therefore, our first objective is to understand what the preference of such influencers are and what makes them decide on which product to push. This program makes a difference on the influencers decision making process and ensures that your product stays top of mind. 

5. Non-monetary incentives 

Such as casual dress days, snack options, flexible schedules etc. are often cheaper to implement but can still have a big impact on employee morale. Or else in case of a Team then it would be a nice dinner or team outing for every team that increases their retention rate by the benchmark percentage. 

6. On-target earnings (OTE) 

It provides salespeople with a realistic view into what their total compensation for a position would be when their expected and reasonable goals and quotas are met. OTE would include the base salary and the realistic commission resulting from closed deals. 

Sales commissions schemes available on Compass 

A sales commission is additional compensation that the salespersons receive for meeting and exceeding the minimum sales threshold. These are generally given to incentivize salespeople to sell more and recognize great sales achievement. 

1. First-year commission and renewal commissions 

A first-year commission is a fee an insurance agent gets paid for selling a new policy. This payment is generally a percentage of the first year of premiums the policyholder pays on the new policy. On contrary, renewal commissions, are paid during the second and subsequent years of the policy. 

2. Quarterly performance bonus 

A quarterly bonus is a popular milestone in achieving the yearly targets and is a great way to encourage extra work, get the sales team more checkpoints to reaching their goal. These goals need to be realistic yet challenging while being aligned with your corporate strategy. 

3. Annual performance bonus 

A performance bonus is generally an additional compensation paid to the salesperson as a reward for achieving or over-achieving their predetermined goals This type of bonus is beyond normal wages and commission and is given out on a long-term basis for prolonged and consistent performance. 

4. International /domestic conventions for Top Performers 

Large sales teams even have contests that reward the top performers a trip to a fully sponsored international/ domestic convention. These rewards are seen to motivate salespeople to aim at listing themselves with the top-notch of their peers 

How you compensate and incentivize is just as important as what you compensate. If your employees don’t love your incentive plan, it won’t matter how much you pay them – they’ll never feel valued. 

Three things your sales rep expect in their incentive plan 

Here are three things that your sales reps love in an incentive plan. 

1. A simple incentive plan that is easy to follow 

If your incentive plan is not transparent and causes confusion, accurate numbers won’t matter because your sales reps still won’t know if they’re being appropriately rewarded.

The plan must be “easy” in all ways: easy to use, easy to understand, and completely transparent. That way, your sales reps can focus on selling instead of calculating incentives. 

2. Rewarding and motivating the middle performers 

Middlers represent the most underutilized capital in business. And they are proof that sometimes, the gold we are chasing sits right under our noses. While some sales reps will excel at closing billion-dollar deals, others will sell your best products, while others still might be the best at managing client relations. If you want your sales reps to love your incentive plan, you need to find a way to reward all types of salespeople, fairly. 

3. Give out meaningful rewards 

When you calculate incentives on Excel spreadsheets, you get the final incentive value. But there is no way you can automate it to release payments.

More often than not, organizations either give out cash vouchers, which are difficult to administer and transfer to the correct rep, or brand vouchers which may not be really relevant for all sales reps. 

Simplify complex incentive plans with Compass 

Compass can simplify the most complex incentive plans and help you build a plan that your sales reps love. Compass lets you integrate and stream data from your CRMs and just relax! We’ve built a system that you can deploy from get-go, with easy-to-publish game templates, auto-calculation to avoid errors and accessible insights. And of course, our implementation engineers are always there to back you up. See how Compass can simplify your sales incentives. 

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Best practices for sales compensation and incentive plans 

A well-structured sales compensation plan not only motivates sales teams but also aligns their efforts with business goals. Here are key best practices to consider when designing a sales commission and incentive plan that drives performance and engagement. 

1. Balance base salary and incentives 

Determine the right pay mix ratio by weighing base salary against variable incentives. For short sales cycles, a commission-heavy structure works best, while longer cycles may require a higher base for stability. Aligning this balance with your sales strategy ensures sustained motivation. 

2. Set clear and attainable goals 

Define realistic, data-backed sales targets that drive effort without overwhelming your team. Aligning sales incentives with strategic objectives fosters motivation while keeping goals achievable. Regular feedback and recognition further reinforce progress. 

3. Avoid commission caps 

Top performers should have unlimited earning potential. Removing commission ceilings ensures continuous effort and rewards high achievers, leading to increased sales and overall business growth. 

4. Offer meaningful rewards 

Beyond monetary incentives, personalized rewards—such as career development opportunities or exclusive perks—enhance motivation. A well-designed incentive compensation plan caters to both financial and intrinsic motivators. 

5. Align rewards with role complexity 

Different sales roles require tailored compensation structures. Consider factors like deal size, sales cycle length, and client complexity when designing commission-based incentive plans to ensure fairness and effectiveness. 

6. Reinforce the right sales behaviors 

Encourage long-term success by rewarding activities beyond immediate sales, such as relationship-building and market expansion. Training, mentorship, and structured incentives help shape a high-performance sales culture. 

7. Communicate and review regularly 

A transparent sales compensation plan prevents confusion and ensures alignment with business objectives. Regularly review and adjust plans based on market shifts, team feedback, and evolving sales strategies. 

The application of these best practices can be seen in the luxury auto brand company.  

Conclusion 

Setting up a strong sales compensation and incentive plan is more than just about paying your team—it's about creating an environment where everyone is motivated to achieve their best.

You encourage hard work and smart work by establishing a balanced pay mix, setting attainable goals, offering unlimited earning potential, and providing meaningful rewards.  

Remember, matching the rewards to the job and promoting the right sales behaviors are key to sustaining success. Also, never underestimate the power of clear communication and regular check-ins; they keep everyone aligned and focused on common goals. Implement these seven best practices, and you'll be well on your way to building a motivated, high-performing sales team. 

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