Question 1

How is sales bonus calculated?

Accepted Answer

For attainment point-based bonuses, calculate how much of the total bonus the rep earns based on the percentage of quota the rep achieved. For an example of an attainment point-based bonus, a rep has a monthly quota of $10,000. If they achieve 100% of quota, the rep collects a bonus of $1,000. However, if they only sell $6,000 of their total quota, the rep would earn a partial bonus of $600 versus the full $1,000. To take it one step further for the Multiple Rate Bonus (Revenue), should the rep continue to bring in revenue after hitting quota, the rep unlocks an additional bonus rate 1.5x the original rate. Meaning if they hit 110% of quota, they get the $1,000 bonus for the first 100% of quota and another $150 bonus for the additional 10% of quota attainment.

Question 2

When would you use a multiple-rate bonus?

Accepted Answer

There are a few reasons why you might use a multiple-rate bonus. For example, if your reps' quotas change every period due to seasonality but you want to maintain the same bonus every period, this plan is right for you. That way you don’t have to change commission rates every quarter/month.

Question 3

How does this differ from a milestone bonus?

Accepted Answer

Reps earn a milestone bonus after meeting a stipulation in which they are paid a set amount as a result of their efforts. These bonuses do not change if the rep is below or above these requirements. Meaning, anything less than the quota, and the rep earns no variable pay. Plus, the rep is not eligible for additional sales incentive compensation within the same quota term after earning the first bonus. With a Multiple Rate Bonus (Revenue), however, the rep receives the same, predetermined bonus rate on revenue generated between 0-100 percent of quota and earns a higher set bonus rate after passing quota. No cap.

Question 4

What’s the difference between sales commissions and bonuses?

Accepted Answer

Sales commissions differ from sales bonuses in that bonuses are based on a set amount of money for completing a task. Commissions, on the other hand, consist of a percentage of the total revenue from a deal. For example, If a rep gets 10% of every deal closed, that’s commission. If a rep earns $300 for every deal they close, that’s a bonus — a single rate bonus!

Question 5

What are some common sales compensation best practices?

Accepted Answer

When it comes to sales compensation and commissions calculations best practices, the best thing you can do as a leader is clearly communicate the methodology behind your sales compensation model to your team. A close second would be to provide every stakeholder tied to commissions with a single source of truth that democratizes the often siloed commission process.

Question 6

What is a typical bonus sales structure?

Accepted Answer

Companies usually implement a commission bonus or an MBO “manage by outcome bonus.” Sometimes both! In the case of a sales commission bonus, a flat bonus is offered and rewarded for meeting a sales quota or based on revenue attainment points.