A sales commission is the part of a salesperson's pay that depends on what they sell. Close a deal, earn a share of it. It's the oldest way to tie pay to results, and still the most common way sales teams are paid.
How a sales commission works
Every commission plan answers three questions:
- What counts? Usually won deals in a given period. Some plans count revenue, others gross margin, others only new customers.
- How much does it pay? A percentage of the deal value (the commission rate) or a fixed amount per deal.
- When is it paid? Monthly or quarterly, often after the customer pays.
Common commission structures
| Structure | How it works | Good for |
|---|---|---|
| Flat rate | Same percentage on every deal, for example 8% | Simple sales, small teams |
| Tiered | The rate goes up as sales go up | Pushing reps past a target |
| Base plus commission | Fixed salary plus a commission on top | Longer sales cycles, B2B |
| Commission only | No base salary, all pay comes from commission | High-volume or freelance sales |
Example
A rep earns 8% on won deals. In March they close three deals worth $12,000, $5,000 and $8,000.
Total sales: $25,000. Commission: $25,000 × 8% = $2,000.
Mistakes to watch for
- Unclear rules. If the plan doesn't say what counts as a won deal or when the month closes, every edge case becomes an argument.
- Bad CRM data. A won deal with no value or the wrong owner gets paid wrong, even when the formula is right.
- Late changes. Deals cancelled or edited after the calculation create gaps between the CRM and what was paid.
These and others are covered in detail in Common Commission Calculation Mistakes.
FAQ
Is commission calculated on revenue or profit?
Either. Revenue-based commission is simpler and more common. Profit or margin-based commission makes sense when reps control pricing and discounts, because it stops them from buying deals with big discounts.
When are sales commissions paid?
Most companies pay monthly, for deals won in the previous month. Some wait until the customer has paid the invoice, to avoid paying commission on revenue that never arrives.
Does Pipedrive calculate sales commissions?
Pipedrive tracks won deals and their values, but it doesn't apply commission rates, tiers or targets per rep. Teams either export the data to a spreadsheet or use a commission tool connected to Pipedrive, such as Delta Drive.