A sales rep's variable compensation generally breaks down into three building blocks: a base salary, a variable portion based on quota attainment, and sometimes accelerators.
1. Define the overall target (OTE)
OTE (On-Target Earnings) is what the sales rep earns if they hit 100% of their quota. It's the starting point for the entire structure. In some models, compensation will start kicking in below that — for example from 80% attainment.
Example: for a B2B sales rep in France, OTE typically lands in the €20–55K range, broken down as:
- 60 to 70% base salary
- 30 to 40% variable
2. Choose a calculation method
Three main models exist:
Commission as a percentage of revenue
Simple: commission = revenue achieved × rate. Well suited to transactional sales. Risk: limited leverage on margin.
Commission on volume
Also simple: commission = volume × associated commission. Suited to unit-based transactional sales, appointments, etc.
Boolean commission
Also simple: commission = fixed amount. Item achieved = compensation paid. (e.g. selling at least 10 contracts in the year)
Quota attainment with tiers
This is the most widespread model in B2B. You define attainment tiers (e.g. 50%, 80%, 100%, 120%) with increasing rates. Above 100%, an accelerator is often applied.
| Attainment | Payout rate |
|---|---|
| 0 – 50% | 0% |
| 50 – 80% | 50% |
| 80 – 100% | 100% |
| 100 – 120% | 150% (accelerator) |
| > 120% | 200% |
Discretionary bonuses
Reserved for specific cases (strategic deals, long-term contracts). To be used as a complement, not as a replacement.
3. Worked example
Let's take a sales rep with:
- Annual base salary: €30,000
- Target variable (100%): €15,000
- Annual quota: €500,000 in revenue
If they bring in €450,000 (i.e. 90% attainment), using the table above:
- On the 50–80% tier: payout of 50% × (15,000 × 30/50) = €4,500
- On the 80–90% tier: payout of 100% × (15,000 × 10/50) = €3,000
- Total variable: €7,500
- Total compensation: €37,500
The exact calculation depends on the precise mechanics of the tiers (cumulative vs. per-bracket). This is exactly the kind of subtlety RemVar lets you configure without writing code.
4. Classic pitfalls
Three frequent mistakes we see in the field:
- Overly complex mechanics: if the sales rep can't easily compute their own number, the system motivates less.
- No cap or poorly set quota: a sales rep who earns 3× their target in one year becomes a problem for the next.
- No prior simulation: testing the plan on last year's numbers before rolling it out avoids 80% of the bad surprises.
What's next?
Once the plan is set, the real challenge is to track commissions in real time rather than at the end of the quarter. That's exactly what RemVar automates: import actuals, apply your business rules, and give visibility to both reps and managers.
Want to give it a try? Our free variable compensation calculator lets you simulate a plan in 30 seconds.