Sales Compensation Planning: Everything to Consider in 2020

Dec 31, 2019
4 min read
Start 2020 with strong sales compensation planning and execution. Here are our top reads for improving your comp planning, analysis, and ASC 606 compliance.

The start of a new year comes with a new strategy and sales plan. That means you must reassess your sales capacity needs, align and balance territories, and create an incentive structure that drives performance—enter your 2020 sales compensation planning.

Your sales compensation plan is a crucial part of your strategy because it drives your company to reach its goals. Therefore, it’s important that your incentives drive the right sales behaviors and motivate reps to achieve and exceed their quota. Throughout your sales compensation planning, it’s important to consider the different parts of your compensation plan (e.g., pay mix, bonus vs. commission, commission rate, etc.).

To help, here are our 10 top how-to reads to strengthen your 2020 sales compensation planning—complete with best practices, tips, and templates.

Understanding Pay Mix & Commission Structures

Read about the different types of sales rep compensation, different commission structures, and tips for paying different roles on your sales team. (Get even more best practices in our Ultimate Guide to Sales Compensation Planning.)

1. What is Pay Mix in Sales Compensation?

To motivate reps, attract new talent, and keep top sales reps from leaving, your sales compensation plan must be competitive. Pay mix—the ratio of base salary to target incentives (aka commission) that your sales reps earn—is an important part of this. Discover how benchmarking against industry pay and performance data can help you create a strong pay mix for competitive sales compensation planning. Read more on pay mix here.

2. Sales Commission Structures: Which Model is Best for Reps?

Typical sales compensation plans are made up of two parts—a fixed base salary and variable commission. Setting the right sales commission rate structure helps motivate reps to achieve and maintain high performance (and can help encourage middle performers to improve). Discover the best sales commission structures for your team.

3. When to Use a Tiered Commission Structure

Tiered commission structures are one of the most common variable pay structures for sales compensation planning. Under this pay structure, sales reps earn higher commission rates once they’ve hit a target amount of sales or percentage of quota (e.g., 6% up to $100,000 in sales, 9% up to $200,000 in sales). See how a tiered commission structure drives performance and motivates reps to meet and exceed quota. Read more on tiered commission structures.

4. What is Draw Against Commission in Sales?

Commissions are a large part of sales rep compensation. A draw against commissions guarantees pay for sales reps to motivate them to perform. These commission advances often work best for onboarding sales reps, who may or may not repay the commissions (depending on your compensation plan). Learn how a draw against commission can motivate reps and increase performance. Read more about using a draw against commission in your sales compensation planning.

5. How to Design a Sales Manager Compensation Plan (With Examples)

Not all sales roles are created equal. Sales reps and managers have different responsibilities, and therefore, their compensation plans should be different. Discover best practices and templates for creating sales compensation plans and how pay should differ by role. Read more about designing a sales manager compensation plan.

Sales Compensation Planning Best Practices and ASC 606 (IFRS 15) Compliance Tips

Discover sales compensation planning best practices and templates, and learn how to transition and comply with the new revenue recognition standard, ASC 606 (IFRS 15). (Plus, you can get even more sales compensation best practices here).

6. How to Develop a Sales Incentive Compensation Plan (with Templates)

Strong sales incentive compensation plans motivate sales reps and are competitive compared to your industry peers. Learn how to design a sales incentive compensation plan that drives the right sales behaviors, and use templates to tailor your incentives by sales role. Read more about developing a sales incentive compensation plan and check out easy templates to get started.

7. 5 Tips for Designing Successful Sales Incentive Compensation Plans

Your sales compensation planning requires more than just incentives to be successful. Ensure your compensation plan is the best it can be with these tips from Xactly CEO, Chris Cabrera. Discover the importance of incentive design, knowing your sales team, and tracking the right metrics to design successful sales incentive compensation plans—straight from our in-house executive expert!

8. Commission Accounting: How to Improve Efficiency for ASC 606 Compliance

ASC 606 (IFRS 15) is now in effect for all public and private companies, yet complying with the new requirements for cost capitalization of commissions is more challenging than we all originally expected. Discover seven best practices on achieving efficient, simplified ASC 606 compliance from Xactly VP Corporate Controller, Dan King.

Motivating Sales Reps Beyond Incentive Compensation

Sales compensation is the main driver behind sales performance, but your sales compensation planning should include additional incentives and coaching tips that sales managers and leaders can use to motivate reps and keep them engaged. (You can read more on Inspiring Sales Rep Performance here.)

9. 16 Sales Incentives to Keep Your Team Engaged and Motivated

Sales team morale can make or break performance. To keep on track towards company goals, sales managers and leaders need to keep sales reps engaged and motivated. One of the most popular methods are SPIFs—special performance incentive funds. Learn how additional sales incentives help keep your sales team engaged and motivated to hit their number. Read more on motivating sales incentives here.

10. Industry MBO Examples to Kickstart Your Sales Team Engagement

Management by Objectives (MBOs) encourage sales reps and provide a way for them to individually strengthen the sales organization as a whole. Discover the benefits of MBOs and how to use them effectively to guide your sales compensation planning. Get more motivation tips and read about industry MBO examples here.

Ready to dive deeper into your sales compensation planning? Download our guide on how performance changes as sales reps gain tenure (and how you can adjust incentives) in our guide, How to Build and Retain Sales Reps to Drive Top Performance.

  • Incentive Compensation