Sales commission plan template, with the formulas and the state rules

This page is for founders, sales managers, RevOps and HR teams writing or revising a commission plan for B2B salespeople. It gives you a plan document, a rate table with spreadsheet formulas, a monthly statement, draw and split rules, two worked examples with the arithmetic, and the US wage law basics that decide whether your plan holds up.

Choose the structure first

Most plans combine two or three, such as base plus a tiered commission on gross margin. Keep the number of moving parts small enough that a rep can calculate their own pay from memory.

The commission plan document

This is the plan itself. Fill in every bracket; a blank is where disputes start.

PLAN: [name, e.g. FY2027 Account Executive Plan]
PERIOD: [start date] to [end date]
WHO IT COVERS: [roles, territories]. Replaces: [earlier plan, if any]

1. PAY AT TARGET
On-target earnings (OTE): $[amount]
Base salary: $[amount] ([%] of OTE)
Target variable pay: $[amount] ([%] of OTE)

2. QUOTA
[Annual / quarterly] quota: $[amount] of [bookings / revenue / gross profit]
What counts toward quota: [e.g. signed contracts with a deposit received]
What doesn't: [e.g. renewals, house accounts, deals under $X]

3. RATES
Base rate: [target variable / quota]% up to 100% of quota
Accelerator: [rate]% on [measure] from 100% to [150]% of quota
Second accelerator: [rate]% above [150]% of quota
Cap: [none / amount]

4. WHEN A COMMISSION IS EARNED
A commission is earned when [the exact event, e.g. the customer's deposit clears].
[If paid in parts: [%] is earned at [event 1] and [%] at [event 2].]

5. WHEN IT'S PAID
Earned commissions are paid [with the next regular payroll / monthly, by the 15th of the following month].

6. CREDIT AND SPLITS
[Rules from the split card below.]

7. CLAWBACKS
If [event, e.g. the customer cancels before installation], commission already paid on that deal is [recovered from future commissions / repaid within X days].
No clawback after [period or event].

8. DRAWS
[None / see draw addendum.]

9. LEAVING THE COMPANY
Commissions earned by the last day of employment are paid [when the law requires; in California, with final wages].
Deals that become earned after the last day: [paid when earned / paid for X days / not paid, where the law allows].

10. CHANGES AND DISPUTES
The company may change this plan [with X days' written notice, effective for future periods only].
Questions about a statement go to [name] within [X] days. [Name] decides; appeals to [name].

Employee signature and date:            Company signature and date:

Rates, accelerators and the spreadsheet formulas

Quota: $[Q]          Target variable pay: $[V]          Base rate: [V / Q]

Attainment band       | Rate on bookings in this band
0% to 100% of quota   | [base rate]%
100% to 150%          | [base rate x 1.5]%
Above 150%            | [base rate x 2]%

Spreadsheet (quota in B1, bookings in B2, rates in D1, D2, D3):
=MIN(B2,B1)*D1 + MAX(0,MIN(B2,1.5*B1)-B1)*D2 + MAX(0,B2-1.5*B1)*D3

Attainment: =B2/B1

The formula pays each band at its own rate, which is the usual way accelerators work: a rep who crosses 100% gets the higher rate only on the bookings above quota. A plan that applies the top rate retroactively to all bookings is far more expensive at the margin; if you mean that, say so in writing.

Worked example: a solar EPC firm's account executive plan

Illustrative example. The company and figures are fictional, to show the method.

The company: Brightfield Solar Builders (brightfield.example), a solar EPC firm that designs and builds systems for commercial customers. Projects are large and take months to install, and a few contracts cancel before construction.

The plan: OTE of $160,000, split 60/40: $96,000 base and $64,000 target variable. Annual quota: $3.2 million in signed contracts. Base rate: $64,000 ÷ $3,200,000 = 2.0%. Accelerators: 3.0% from 100% to 150% of quota, 4.0% above 150%. Half the commission is earned when the contract is signed and the customer's deposit clears; the other half when the system is energized. If a contract cancels before installation, the first half is recovered from future commissions.

Why the timing rule matters. A $1 million contract signed in November pays $10,000 when the deposit clears and $10,000 when the system is energized, perhaps in April. If the rep leaves in February, the plan has already said the second half becomes earned at energizing, which in California means it's paid when that happens (see the rules below). Without that sentence, the company and the rep would be arguing about it.

Worked example: paying on gross margin

Illustrative example. A print management company buys printing from suppliers and resells it to multi-site customers, so its margin varies from account to account. Compare two new accounts, each worth $400,000 a year:

The revenue plan pays the same for both accounts, so the rep has no reason to protect price. The margin plan pays nearly twice as much for the account that earns the company nearly twice as much. The cost is transparency: reps must see the gross profit on their deals to trust their statements.

Commission base: gross profit = invoiced revenue minus [cost of goods / supplier cost / direct delivery cost], as shown in [system].
New account rate: [%] of gross profit for the first [12] months after first invoice.
Existing account rate: [%] of gross profit thereafter.
Minimum margin: no commission on orders below [%] gross margin without [approver]'s sign-off.
Statements show revenue, cost and gross profit for each account.

Monthly commission statement

Rep: [name]          Period: [month]          Plan: [name]

Deal / account | Event this month | Amount credited | Rate | Commission
[name]         | [signed / paid / energized] | $[ ] | [ ]% | $[ ]

Total earned this month: $[ ]
Clawbacks this month: -$[ ] ([deal], [reason])
Draw paid this month: -$[ ]
Draw balance carried forward: $[ ]
Commission payable: $[ ]

Year to date: bookings $[ ], attainment [ ]%, commission $[ ]
Questions by [date] to [name].

Draws and split credit

Draw: $[amount] per [month], for [number] months from [start date].
Each month, earned commissions are compared with the draw:
- If commissions exceed the draw, the excess first reduces any draw balance, then is paid.
- If commissions are less than the draw, the shortfall is added to the draw balance.
Reconciliation: [monthly].
At the end of the draw period, any remaining balance is [forgiven / recovered from future commissions over X months].
If employment ends, any remaining balance is [forgiven / handled as follows, where the law allows: ...].

Illustrative draw arithmetic: a new rep on a $4,000 monthly draw earns $1,500, $2,500, $5,000 and $7,000 in commission over four months. The balance runs $2,500, then $4,000, then $3,000 (the $1,000 above the draw in month three pays it down), then zero (month four's $3,000 above the draw clears it). From month five, she's paid commissions as earned.

One owner: the rep who owns the account in [CRM] on the date the contract is signed gets 100% credit.
Sourced by another rep: [70 / 30] split between the closing rep and the sourcing rep, if the source is logged in [CRM] before the first meeting.
Overlay roles (sales engineer, specialist): credited [%] toward their own quota; does not reduce the account owner's credit.
Territory changes mid-deal: the rep who owned the account when the opportunity was created keeps credit if the deal closes within [90] days.
Disputes: decided by [name] within [10] business days.

US wage law basics for commission plans

This is general information, not legal advice. State wage laws decide when a commission counts as wages and when it must be paid, and they differ. Have an employment lawyer review the plan before reps sign it.

• California: the plan must be in writing. Labor Code 2751 says that when an employer contracts with an employee for work in California and pay involves commissions, "the contract shall be in writing and shall set forth the method by which the commissions shall be computed and paid." The employer must give each employee a signed copy and "obtain a signed receipt." If a plan expires and everyone keeps working under it, its terms are presumed to continue until it's replaced or employment ends. The section excludes short-term productivity bonuses, temporary incentives that only increase pay, and most bonus and profit-sharing plans. The 2011 amendment (AB 1396) required commission contracts to meet this rule by 1 January 2013.
• California: earned commissions are due with final pay. The Labor Commissioner says commissions earned by the termination date must be paid on that date after a discharge, or within 72 hours of a quit without notice. A commission waiting on a condition, such as the customer's payment, must be paid as soon as that condition is met. That's why your plan's "earned" sentence matters so much.
• New York: a signed written agreement. Labor Law 191(1)(c) requires the terms for a commission salesperson to be "reduced to writing, signed by both the employer and the commission salesperson." The agreement must describe how wages, salary, drawing account, commissions and other money are calculated, how often any recoverable draw is reconciled, and what's paid when employment ends. The employer must keep it for three years. If the employer can't produce it, the salesperson's account of the terms is presumed correct.
• Federal: commission doesn't remove overtime by itself. Under the Fair Labor Standards Act, the outside sales exemption applies when the employee's primary duty is making sales and they're "customarily and regularly engaged away from the employer's place or places of business." Sales made by phone, mail or the internet don't count unless they're an adjunct to in-person calls. Inside reps paid on commission are usually still owed minimum wage and overtime unless another exemption applies.

Other states have their own rules on when commissions become wages and when they must be paid after someone leaves. Check your state labor department's guidance for every state where your reps work.

Mistakes to avoid

• A vague "earned" event. "When the deal closes" can mean signature, invoice or payment. Pick one and write it down.
• Changing the plan mid-period without notice. Apply changes to future periods, in writing, with each rep's signature.
• Retroactive accelerators by accident. Say whether higher rates apply to the bookings above quota or to everything.
• Clawbacks with no end date. State the event that ends the clawback window.
• Too many measures. Three is plenty. Reps work on what they can calculate.
• A quota with no pipeline behind it. A plan only pays if reps have enough real opportunities; check the territory can support the number before you set it. When the list is the problem, Bebop finds companies that match your customer profile and explains why each fits.

Checklist

• Every role and period the plan covers is named.
• OTE, base and target variable add up, and the base rate equals target variable divided by quota.
• The earned event and the payment date are each one clear sentence.
• The rate formula has been tested at 50%, 100%, 125% and 175% of quota.
• Split, clawback, draw and leaver rules are written down.
• California reps get a signed copy and sign a receipt; New York agreements are signed by both sides and kept for three years.
• Inside reps on commission are paid at least minimum wage and overtime where it applies.

Next step: set a quota your reps can actually reach by building it from the territory up, with the sales plan template.