Benefits and Compensation

What’s the Appropriate Sales Level for Commission to Kick In?

Schum, a Senior Consultant at Compensation Resources, Inc. in Upper Saddle River, NJ offered his tips for sales compensation design at a recent webinar sponsored by BLR/HRhero.

Sales Compensation Model

Schum offers an example of the true cost of a salesperson and then charts out how that might translate into a bonus program.

Cost of Salesperson 

Base Salary 
$60,000 
Benefits (35% of Salary)   
$21,000
T&E ($2,000/month)   
$24,000
Car Allowance ($600/month)  
$7,200 
Overhead/Management 
Allocation ($3,000/month) 
$36,000 
Sales Support ($2,000/month)   
$24,000
Total Cost:  
$172,200 
Average Margin: 10% 
Sales required to pay off cost:   
$1,722,000
Sales as multiple of Salary: 
28.7 

To set up a bonus program that increases the percentage of bonus as sales increase, Schum sets up the grid below. This salesperson first becomes bonusable at $1,800,000, a figure somewhat above the “minimum sales required” number from above.


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The first column below indicates the multiple of salary corresponding to dollar value of sales in the second column. The increments of sales go up by $300,000 at a time. The commission column shows what the salesperson gets from that $300,000 and the Net column shows what the company keeps of the $300,000.

The figures in the last two columns are cumulative; for example, if sales were $2,399,999, the commission would be $7,500 and the Net to company would be $592,498.

Sales Range mult. of salary)

Revenue Range

% Comm.

$ Comm. (at Max)

Net to Co. ( (at Max)

29.9  or less 

<  $1,800,000 

0.0% 

30.0-34.9

$1,800,000- $2,099,999

1.0%

$3,000

$296,999 

35.0-39.9

$2,100,000- $2,399,999

1.5%

$4,500

$295,499 

40.0-44.9

$2,400,000- $2,699,999

2.0%

$6,000

$293,999 

45.0-49.9

$2,700,000- $2,999,999

2.5%

$7,500

$292,499 

50.0-54.9

$3,000,000- $3,299,999

3.0%

$9,000

$290,999 

55.0-59.9

$3,300,000- $3,599,999

3.5%

$10,500

$289,499 

60.0  or greater

$3,600,000+

4.0% 

$10,500  and up 

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