Sales Compensation Plan: [Role] [Plan year]
The plan document that tells a seller how variable pay is earned: eligible
roles, pay mix and on-target earnings, quota, commission rates,
accelerators, crediting rules, payment timing, clawbacks, changes in
employment, plan governance and the dispute process, with a signed
acknowledgement. Based on common sales compensation practice, with dated
checkpoints for written commission terms (California Labor Code section
2751, UK written statement of employment particulars, EU Directive
2019/1152) and for the accounting of commission costs (IFRS 15 paragraphs
91 to 94, US GAAP ASC 340-40). Replace every [bracketed] value and every
row marked Example. This is a documentation format, not legal, tax or
accounting advice: check the current official texts and a qualified
employment lawyer and your auditor before you issue a plan.
Document control
| Field | Value |
|---|
| Document ID | [SCP-YYYY-NNN] |
| Plan name | [FY2027 Account Executive Plan] |
| Plan period | [2027-01-01 to 2027-12-31] |
| Eligible roles | [Account Executive, Senior Account Executive] |
| Version | [1.0] |
| Status | [Draft / Approved / Issued / Superseded] |
| Owner | [@sales-operations-lead] |
| Approvers/reviewers | [@chief-revenue-officer], [@cfo], [@head-of-people], [@legal-counsel] |
| Plan administrator | [@commissions-analyst] |
| Jurisdictions covered | [Countries and states where participants work] |
| Currency | [EUR / GBP / USD] |
| Last updated | YYYY-MM-DD |
| Classification | [Confidential: participants and plan administrators] |
Approvals
| Role | Name | Decision | Date |
|---|
| Chief revenue officer | [@name] | [Approved / Changes requested] | YYYY-MM-DD |
| Chief financial officer | [@name] | [Approved / Changes requested] | YYYY-MM-DD |
| Head of people | [@name] | [Approved / Changes requested] | YYYY-MM-DD |
| Legal counsel | [@name] | [Reviewed for each jurisdiction] | YYYY-MM-DD |
Revision history
| Version | Date | Author | Change summary |
|---|
| 0.1 | YYYY-MM-DD | [@name] | First draft for design review |
| 1.0 (Example) | 2026-12-01 | Sales operations | Approved and issued for FY2027 |
| 1.1 (Example) | 2027-04-01 | Sales operations | Section 10 SPIFF added for Q2; acknowledged again by all participants |
Contents
1. Purpose, scope and eligibility
This plan sets out how participants earn variable pay for the plan period.
It rewards [new annual recurring revenue from new and existing customers]
because that is the company's main growth goal for [plan year]. It is read
together with each participant's individual schedule (Appendix A) and with
the employment contract. Where the plan and the contract conflict, [state
which document prevails, as advised by legal counsel].
| Item | Rule |
|---|
| Eligible roles | [Account Executive, Senior Account Executive] |
| Not eligible | [Sales managers (separate plan), sales engineers (separate plan), contractors and agents (commercial agreement)] |
| Plan period | [2027-01-01 to 2027-12-31] |
| Entry | [Participant is enrolled from the first day in an eligible role; quota is prorated as in section 11] |
| Measures | [New ARR bookings (100% of target incentive)] |
| What the plan does not cover | [Base salary, benefits, equity, recognition awards, expenses] |
2. Plan principles
| ID | Principle |
|---|
| PRN-01 | Pay for results the company wants: [new ARR at or above the approved discount level]. |
| PRN-02 | Keep it simple: one main measure, a rate a seller can calculate on a phone. |
| PRN-03 | Pay above target generously: every euro above quota earns more than a euro below it. |
| PRN-04 | Pay once: the same booking is credited once per role unless section 7 says otherwise. |
| PRN-05 | Pay on real revenue: commissions are earned only on bookings the customer pays for (section 9). |
| PRN-06 | Be consistent and documented: every exception is approved in writing and logged. |
3. Definitions
| Term | Definition in this plan |
|---|
| Booking | [A customer order signed by both parties, entered and approved in the CRM, with a valid purchase order where the customer requires one] |
| New ARR | [Annualised recurring subscription value of a booking, net of discounts, excluding one-time fees, taxes and pass-through costs] |
| First-year ACV | [Recurring value invoiced for the first 12 months of a multi-year booking] |
| Attainment | Credited new ARR for the period divided by quota for the same period, shown as a percentage |
| Target incentive (TI) | Variable pay earned at 100% attainment |
| On-target earnings (OTE) | Base salary plus target incentive |
| Base commission rate (BCR) | Target incentive divided by annual quota |
| Credit date | [The date the booking is approved in the CRM] |
| Earned | [A commission is earned when the conditions in section 8 are met, and not before] |
4. Pay mix and on-target earnings
| Role | Pay mix (base : variable) | OTE | Base salary | Target incentive |
|---|
| Account Executive (Example) | 60 : 40 | 160,000 | 96,000 | 64,000 |
| Senior Account Executive | [60 : 40] | [Amount] | [Amount] | [Amount] |
| [Role] | [Mix] | [Amount] | [Amount] | [Amount] |
Base salary is paid under the employment contract and is not at risk under
this plan. Target incentive is an opportunity, not a guarantee: the amount
earned depends on attainment as calculated in section 6.
5. Quota
Each participant's quota is in their individual schedule. Quota is set from
the territory and capacity model (sales/territory-quota-plan) and approved
by the chief revenue officer.
| Quarter | Share of annual quota | Quota (Example) |
|---|
| Q1 | 20% | 160,000 |
| Q2 | 25% | 200,000 |
| Q3 | 25% | 200,000 |
| Q4 | 30% | 240,000 |
| Year | 100% | 800,000 |
Quota relief is granted only for these events, approved in writing by
[the chief revenue officer and the CFO]:
- a named account moved out of the participant's territory by the company
after the plan start, with relief equal to [the account's planned
bookings in the territory plan];
- approved leave of more than [20 working days], prorated as in section 11;
- a product withdrawn from sale by the company during the plan period.
Quota is not reduced because a forecast deal slipped, a customer chose a
competitor or market conditions changed.
6. Commission rates and accelerators
Commission is calculated on cumulative year-to-date credited new ARR.
Tiers are marginal: each tier's rate applies only to the bookings that
fall within it, never retroactively.
| Tier | Annual attainment band | Rate on credited new ARR in the band | Multiple of BCR |
|---|
| T1 (Example) | 0% to 100% (0 to 800,000) | 8% | 1.0 |
| T2 (Example) | Over 100% to 150% (800,000 to 1,200,000) | 12% | 1.5 |
| T3 (Example) | Over 150% (above 1,200,000) | 16% | 2.0 |
BCR in the example: 64,000 divided by 800,000 = 8%.
| Annual attainment | Credited new ARR | Commission earned | Total cash (base 96,000) |
|---|
| 0% (Example) | 0 | 0 | 96,000 |
| 50% (Example) | 400,000 | 32,000 | 128,000 |
| 100% (Example) | 800,000 | 64,000 | 160,000 |
| 125% (Example) | 1,000,000 | 88,000 | 184,000 |
| 150% (Example) | 1,200,000 | 112,000 | 208,000 |
| 175% (Example) | 1,400,000 | 144,000 | 240,000 |
| Item | Rule |
|---|
| Threshold | [None: commission is paid from the first credited booking] |
| Cap | [No cap on total commission] |
| Windfall review | [A single booking above 400,000 new ARR (50% of annual quota) is reviewed by the compensation committee before payment. The committee may set the credit for that booking, under a rule published here: for example, T3 rate applies to no more than the first 400,000 of the booking.] |
| Discount gate | [Bookings approved above the standard discount authority earn commission at [75%] of the applicable rate] |
7. Crediting rules
| ID | Case | Rule |
|---|
| CR-01 | Territory | The participant is credited for bookings from accounts assigned to their territory in the CRM on the credit date. |
| CR-02 | Multi-year bookings | Credit is first-year ACV only. Later years are not credited unless [a separate multi-year measure applies]. |
| CR-03 | Renewals | [Renewals at the prior value are not credited. Increases at renewal (uplift) are credited as new ARR.] |
| CR-04 | Splits between participants | [Two participants on one booking split the credit 50 : 50 unless a different split is approved in the CRM before signature.] |
| CR-05 | Overlay roles | [Specialists with their own plan receive their own credit. This does not reduce the participant's credit.] |
| CR-06 | Territory transfer in flight | [Booking signed within 60 days of the transfer: 50 : 50 between the old and new owner.] |
| CR-07 | Partner-sourced deals | [Credited at 100% to the territory owner. Partner fees do not reduce the credit.] |
| CR-08 | Non-standard terms | [Bookings with free months, termination for convenience or uncapped service credits are credited only when approved by deal desk.] |
| CR-09 | House accounts | [Accounts named in Appendix B are not credited to any participant.] |
| CR-[NN] | [Case] | [Rule] |
8. Calculation and payment timing
| Step | Rule (Example) |
|---|
| Earned | Commission on a booking is earned when the booking is credited and [the customer's first invoice is paid]. |
| Statement | A commission statement is issued by the [10th working day] after each quarter end, showing bookings, credit, attainment, tiers, adjustments and the amount payable. |
| Payment | Paid with the payroll run [in the month after the statement]. |
| Advance | [Commission on a credited booking whose first invoice is unpaid at statement date is advanced and becomes subject to section 9.] |
| Year-end true-up | The Q4 statement recalculates the full year, so tiers are applied once to the year's cumulative credit. |
| Tax and deductions | Commission is paid through payroll, subject to the deductions required by law. |
9. Clawbacks, holdbacks and adjustments
| ID | Trigger | Time limit | Method |
|---|
| CLW-01 (Example) | Customer cancels or is released from the booking | Within 90 days of the credit date | Credit reversed, year-to-date commission recalculated |
| CLW-02 (Example) | First invoice unpaid | 120 days after the invoice date | Credit reversed until the invoice is paid, then restored |
| CLW-03 (Example) | Booking later found to break company policy (side letters, unapproved terms) | [12 months] | Credit reversed in full, plus other measures under company policy |
| CLW-04 (Example) | Calculation error by the company | [12 months] | Corrected on the next statement, upward or downward |
Recovery method: [a reversal reduces the next statement. If the next
statement is lower than the amount to recover, the balance is carried
forward. Recovery from salary, or after employment ends, happens only where
the law allows it and the participant has agreed to it in writing, as
confirmed by legal counsel for each jurisdiction.]
Holdback: [none] or [10% of each quarter's commission is held until the
year-end true-up].
10. SPIFFs and contests
| ID | Period | Behaviour rewarded | Award | Funding approved by |
|---|
| SPF-01 (Example) | 2027-04-01 to 2027-06-30 | First booking of [new product] per participant | 1,500 per qualifying booking, maximum 2 per participant | CRO and CFO |
| SPF-[NN] | [Dates] | [Behaviour] | [Amount and limit] | [Approver] |
SPIFFs are paid with the next quarterly statement. They are discretionary
awards for the stated period only, unless the SPIFF notice states
otherwise.
11. Changes in employment
| Event | Rule (Example) |
|---|
| New hire | Quota prorated by full months remaining. First quarter: ramp quota of 50% of the quarterly quota (Q1 example: 80,000). |
| Draw for new hires | Non-recoverable draw of 50% of monthly target incentive for the first 3 months (64,000 / 12 x 3 x 50% = 8,000), offset against commission earned in those months. |
| Leave over [20 working days] | Quota prorated for the days of leave. Bookings credited during leave are paid as normal. |
| Transfer to another eligible role | Two calculation periods, each with its own prorated quota. Tiers apply to each period separately. |
| Transfer out of the plan | Commission earned up to the transfer date is paid on the normal schedule. |
| Employment ends | [Commission earned on bookings credited before the last day of employment is paid on the normal schedule, subject to section 9, and as required by the law of the place of work.] |
12. Plan administration and changes
- The plan administrator runs calculations, issues statements and keeps
the plan records for [7 years].
- The compensation committee ([CRO, CFO, head of people]) approves the
plan, exceptions, windfall decisions and disputes at the final stage.
- The company may amend or end the plan with [30 days'] written notice.
Changes apply from the notice date forward and do not reduce commission
already earned.
- Each change is issued as a new version with a revision history entry,
and each participant acknowledges it again (section 16).
- Exceptions are approved in writing and recorded in an exceptions log
with the reason and the principle (section 2) relied on.
| ID | Date | Participant | Exception | Principle | Approved by |
|---|
| EXC-01 (Example) | 2027-05-14 | Participant 07 | 60 : 40 split on a booking where two participants co-sold, outside CR-04 default | PRN-06 | Compensation committee |
13. Disputes
- The participant raises a dispute in writing to the plan administrator
within [30 days] of the statement date, naming the booking and the
amount.
- Sales operations answers in writing within [10 working days].
- If the participant does not accept the answer, the compensation
committee decides within [20 working days], applying the plan text
first and the principles in section 2 second.
- The decision is recorded in the disputes log and any correction is paid
with the next statement.
This process does not limit any right the participant has under the law
of their place of work.
14. Legal and accounting checkpoints
Checked on 2026-10-30. Laws and standards change: check the current
official text before relying on any row.
| Jurisdiction or standard | What it covers (paraphrased) | Plan sections affected | Question for counsel or auditor |
|---|
| California, US: Labor Code section 2751 | Where pay for work in California involves commissions, the contract must be in writing and set out how commissions are computed and paid. The employer gives each employee a signed copy and obtains a signed receipt. If the contract expires and work continues, its terms are presumed to continue until superseded or employment ends. Short-term productivity bonuses, temporary incentives that only increase pay, and bonus or profit-sharing plans (unless they pay a fixed percentage of sales or profits for work performed) are excluded. | 6, 7, 8, 16 | Does the plan, with Appendix A, set out the method of computation and payment in full? Do we hold a signed receipt for every California participant? |
| United Kingdom: written statement of employment particulars | Employers give a written statement that includes how much and how often a worker is paid, on or before the first day of work, and notify changes within one month. Deductions from wages are allowed only in listed cases, such as where the contract allows it or the worker agreed in writing. | 8, 9, 12 | Does the contract or a signed agreement authorise each clawback method? Are changes notified within one month? |
| European Union: Directive (EU) 2019/1152 on transparent and predictable working conditions | Workers receive written information on the essential aspects of the employment relationship, including remuneration, its component elements, and the frequency and method of payment (Article 4(2)(k)). Transposition was due by 1 August 2022, so national law applies. | 4, 6, 8 | What does the national law of each participant's country require for variable pay information? |
| European Union: Directive (EU) 2023/970 on pay transparency | Pay includes variable components. Pay structures must allow equal pay for equal work or work of equal value. Transposition was due by 7 June 2026, so check national law. | 4, 5, 11 | Are quota, mix and accelerators set on gender-neutral criteria, and can the company explain differences between participants in the same role? |
| IFRS 15 paragraphs 91 to 94 | Incremental costs of obtaining a contract, such as commissions, are recognised as an asset if expected to be recovered. A practical expedient allows expensing when the amortisation period would be one year or less. | 8, 9 | Which commissions are incremental, over what period are they amortised, and is the expedient elected? |
| US GAAP ASC 340-40 (Other Assets and Deferred Costs, Contracts with Customers) | Parallel US GAAP guidance on incremental costs of obtaining a contract. | 8, 9 | Same questions as for IFRS 15, for US GAAP reporters. |
Accounting example: a commission of 4,800 on a three-year contract, where
any renewal earns a commission commensurate with this one, could be
capitalised and amortised over the 36-month contract term, which is 133.33
per month. If renewals earn no commensurate commission, the amortisation
period usually also covers anticipated renewals (IFRS 15 paragraph 99;
ASC 340-40-35-1), so ask your auditor. The accounting period is a
finance decision documented in the revenue recognition memo
(finance/revenue-recognition-memo), not a plan rule.
15. Worked examples
15.1 Quarterly statements for a full year
Participant 07 (Example, fictional): annual quota 800,000, target
incentive 64,000, rates from section 6. Tiers apply to cumulative
year-to-date credit; each quarter pays the change in cumulative commission.
| Quarter | Credited new ARR | Cumulative credit | Attainment to date | Cumulative commission | Paid this quarter |
|---|
| Q1 (Example) | 150,000 | 150,000 | 18.8% | 12,000 | 12,000 |
| Q2 (Example) | 230,000 | 380,000 | 47.5% | 30,400 | 18,400 |
| Q3 (Example) | 260,000 | 640,000 | 80.0% | 51,200 | 20,800 |
| Q4 (Example) | 360,000 | 1,000,000 | 125.0% | 88,000 | 36,800 |
Year-end check: 800,000 x 8% = 64,000, plus 200,000 x 12% = 24,000,
total 88,000.
15.2 Clawback in Q4
A Q3 booking of 40,000 new ARR is cancelled within 90 days of its credit
date (CLW-01). Credit is reversed and the year is recalculated.
| Item | Amount |
|---|
| Cumulative credit after reversal | 960,000 (120.0% attainment) |
| Cumulative commission: 800,000 x 8% + 160,000 x 12% | 83,200 |
| Commission paid Q1 to Q3 | 51,200 |
| Q4 payment | 32,000 |
| Effect of the clawback against 15.1 | 4,800 less, because the reversed credit came off the top tier reached (40,000 x 12%) |
| Total cash for the year (base 96,000) | 179,200 |
16. Acknowledgement
I have received a copy of this plan, version [1.0], and my individual
schedule (Appendix A). I have had the opportunity to ask questions.
| Participant name | Role | Version | Signature | Date |
|---|
| [Name] | [Role] | [1.0] | [Signature] | YYYY-MM-DD |
| Company representative | Role | Signature | Date |
|---|
| [Name] | [Head of people] | [Signature] | YYYY-MM-DD |
Appendix A: Individual schedule
| Field | Value |
|---|
| Participant | [Name], [Employee ID] |
| Role and plan | [Account Executive, FY2027 AE Plan v1.0] |
| Territory | [Territory ID from sales/territory-quota-plan] |
| Annual quota | [Amount], quarterly split as in section 5 |
| Target incentive | [Amount] |
| Base commission rate | [TI / quota] |
| Start date in plan | YYYY-MM-DD |
Appendix B: House accounts
| Account | Reason | Owner |
|---|
| [Account] | [Strategic partner, global agreement] | [Owner] |
17. Glossary and references
17.1 Glossary
| Term | Meaning |
|---|
| Accelerator | A higher commission rate for credit above a stated attainment level |
| Clawback | Reversal of commission already paid, when a stated trigger occurs |
| Decelerator | A lower rate for credit below a threshold (not used in the example) |
| Draw | An advance against future commission, recoverable or non-recoverable |
| Overlay | A specialist role credited on bookings alongside the territory owner |
| SPIFF | A short-term incentive for a specific action over a short period |
| Windfall | A booking so large, relative to quota, that normal rates would overpay for the effort involved |
17.2 References
| ID | Reference | Version or date | Use |
|---|
| REF-01 | California Labor Code section 2751, official text at leginfo.legislature.ca.gov | As in force, checked 2026-10-30 | Section 14, 16 |
| REF-02 | GOV.UK, Employment contracts: written statement of employment particulars, https://www.gov.uk/employment-contracts-and-conditions/written-statement-of-employment-particulars | Checked 2026-10-30 | Section 14 |
| REF-03 | GOV.UK, Understanding your pay: deductions from your pay, https://www.gov.uk/understanding-your-pay/deductions-from-your-pay | Checked 2026-10-30 | Section 9, 14 |
| REF-04 | Directive (EU) 2019/1152, https://eur-lex.europa.eu/eli/dir/2019/1152/oj | Adopted 20 June 2019, transposition by 1 August 2022 | Section 14 |
| REF-05 | Directive (EU) 2023/970, https://eur-lex.europa.eu/eli/dir/2023/970/oj | Transposition deadline 7 June 2026 | Section 14 |
| REF-06 | IFRS 15 Revenue from Contracts with Customers, paragraphs 91 to 94. Official text: IFRS Foundation, licensed access: https://www.ifrs.org/issued-standards/list-of-standards/ifrs-15-revenue-from-contracts-with-customers/ | Issued May 2014, effective 1 January 2018 | Section 14 |
| REF-07 | FASB Accounting Standards Codification Topic 340-40. Official text: FASB, licensed access: https://asc.fasb.org/ | As codified, check current version | Section 14 |
| REF-08 | Company employment contracts, booking policy and discount authority | [Version] | Sections 3, 6, 7 |
Standard and licence note
Based on common sales compensation practice and on public law: California
Labor Code section 2751, the UK written statement and deductions rules as
published on GOV.UK, and Directives (EU) 2019/1152 and 2023/970, all
paraphrased in original words. IFRS 15 and FASB ASC 340-40 are cited by
paragraph and topic number only. Official text: IFRS Foundation and FASB,
licensed access through their websites. No wording from any standard,
textbook or consulting plan is reproduced; the rates, tiers, triggers and
the fictional participant are illustrative. Check the current official
texts, a qualified employment lawyer in each jurisdiction and your auditor
before issuing a plan. This template is not legal, tax or accounting
advice. Template licence: MIT.