Sales commission structures: SaaS models that work

When it comes to SaaS, your commission structure should match both your sales process and customer value. Here’s a breakdown of the most common models — when to use them and what industry benchmarks suggest.

Flat-rate commission (straight percentage on deals)

What it is: A fixed percentage on every deal closed, typically based on Annual Recurring Revenue (ARR) or first-year contract value.

Best for:

Simpler, transactional sales models
Low-mid ACV deals (e.g., £1,000–£10,000 ARR)
Quick close cycles (30 days or less)

Typical rates:

8%–12% of first-year ARR

Things to watch out for:

Overpaying on high-churn deals — consider tying commission to retention.
Lack of incentive to close larger/more strategic deals unless tiered.

Tiered commission (accelerators for overperformance)

What it is: Commission rates increase as reps hit and exceed quota — motivating top performers to go beyond the set target.

Best for:

High-growth SaaS with aggressive sales goals
Mid-large ACV (e.g., £10,000–£100,000 ARR)
Sales cultures that reward overperformance

Typical structure:

8% up to quota, 12–15% beyond quota
Accelerators of 1.25–1.5x for performance 120%+ of target

Watch out for:

Quotas set too low = runaway comp costs. Needs strong quota discipline.

Ramp-up commission (for new hires)

What it is: Temporary lower quota expectations and adjusted commission rates during the ramp period (first 3–6 months).

Best for:

New sales reps needing onboarding and training
Complex sales cycles (90+ days)

Typical ramp:

50% of quota for first 3 months
Guaranteed minimum commission floor to avoid demotivation

Watch out for:

Reps that rely too heavily on ramp. You need to combine this with clear success metrics to prevent this from happening.

Split/retention-based commission (multi-stage payouts)

What it is: The commission is split between deal close and customer retention milestone (e.g., 6-month retention). Best for:

High churn-risk products or markets
Sales teams also responsible for long-term account growth

Typical split:

50% of commission at close, 50% after 6 months active
Option: tie the second half to customer success/health score

Watch out for:

Reps may resist delayed commissions. When deploying this strategy, it needs a strong explanation and alignment.

Hybrid and multi-year deal incentives

What it is: Combination of base % of ARR, plus bonuses for multi-year contracts or upfront payment.

Best for:

Enterprise SaaS with long sales cycles
Large ACV, multi-year contracts

Typical structure:

5%–8% of ARR for enterprise SaaS
A bonus of 10%–20% uplift on commission for 2+ year deals
Extra incentives for upfront full-payment deals to improve cash flow

Watch out for:

Over-discounting on multi-year deals to trigger higher commission — control via pricing governance.

Benchmarks for SaaS sales compensation

Role	Base Salary (GBP)	OTE (GBP)	Typical Commission % of ARR	Notes
SMB AE (Small Deals)	£40k–£50k	£80k–£100k	8%–12%	Typically, full-cycle reps, shorter sales cycle
Mid-Market AE	£50k–£70k	£100k–£140k	7%–10%	Mix of inbound/ outbound, 2–3 month cycles
Enterprise AE	£70k–£100k	£150k–£200k	5%–8%	Longer cycle, strategic selling
SDR/BDR (Lead Gen)	£30k–£40k	£50k–£65k	Paid on qualified meetings and sourced revenue	Typically compensated on meetings and pipeline influence

Key takeaways

Choose a structure that rewards reps for the behaviours you want — not just for revenue.

If you:

Need fast growth: Use tiered commissions and accelerators.
Worry about churn: Use split/retention-based commissions.
Sell enterprise: Use hybrid and multi-year deal incentives.

Don't be afraid to evolve the plan as you grow — what works for a £1M ARR startup won’t work when you hit £20M ARR.

Want more?

If you want sample commission plan templates or a deeper dive into OTE modelling for your SaaS stage, drop me a line. Happy to share resources.