Bonus Structure Examples

Companies with a well-designed sales bonus structure report 50% higher employee retention.

Creating a strong plan is crucial to attract and retain top talent in the competitive SaaS industry, where more open roles exist than highly experienced candidates. Bonus structures also play an essential role in motivating employees and aligning individual performance with company goals.

A bonus structure is an incentive consisting of a designated sum of money awarded when an employee meets or exceeds a target. The key components of a sales bonus structure include target metrics, payout thresholds, and performance periods.

SaaS companies use various bonuses, including performance-based, spot, and profit-sharing bonuses. We’ll define these below.

In this article, we’ll explore various bonus structure examples across different roles in SaaS companies. Remember that bonuses will vary according to the role, such as sales, marketing, customer success, sales managers, or engineering, which we’ll outline below.

Bonus Structure Examples + Definitions

There are various bonus structures you can use in your incentive strategy. Consider these definitions and compensation structure examples as you build your plan.

Performance-based Bonuses:

Three popular performance-based bonuses include a single rate, a single rate attainment point bonus, and a milestone bonus.

Single rate: A quantity-based bonus plan that awards a set dollar amount for each deal a rep closes, regardless of how large or small the deal is. An example of a single rate bonus is when a sales rep earns $200 for each deal they sell.

Single rate attainment point bonus: A single rate, revenue-based bonus plan with a fixed dollar amount awarded per quota attainment point. For instance, under this bonus plan a rep earns $50 per quota attainment point. Therefore, if they achieve 100% of quota by the end of the period, they receive $50 x 100 points, or $5K.

Milestone bonus: A milestone bonus is a fixed amount awarded when a predetermined threshold is achieved or exceeded. This type of bonus is often used to motivate a specific level of achievement, such as hitting quota every month. Therefore, when a rep hits their quota, they earn the milestone bonus. If they fall short, they earn nothing. Then if they exceed quota, they do not earn any additional award in this scenario.

Spot Bonuses

A fixed monetary reward is paid when a specific result is achieved. For example, a new hire receives a signing bonus, or a sales rep is awarded a spot bonus for closing the most sales during a set time.

Profit-sharing

A percentage of a company’s profits over a designated time, such as quarterly or annually. This award is typically offered to management as an incentive and only applies when the company sees a profit.

Bonus Structure Examples by Roles

Now, let’s do the same but by role.

Sales Bonus Structures

Below are a few of the sales metrics tied to compensation.

• Quota attainment: A measure of individual or team performance compared to sales goals.  
• Revenue generated: The total revenue resulting from closed sales during a defined period.
• New customer acquisition: Number of new customers secured during a set period.
• Account expansion/upsell: Revenue growth generated by existing accounts purchasing an additional product or more of the product or service they’re already using.

To pay these out, you could offer:

• Commission-based bonus: The percentage of new sales or exceeding quota triggers a bonus payout. For instance, a 10% commission for exceeding quota by 10%.
• Tiered Commissions: Increasing commission percentages based on exceeding specific sales targets. For example, 10% commission for 100% quota attainment and 15% for 120%.
• Achievement Bonuses: Lump sum bonus for achieving specific goals like landing a large client or opening a new market.

Marketing Bonus Structures

Next, we’ll take a look at metrics tied to marketing incentive pay.

• Lead generation: Number of new potential customers identified and cultivated.
• Qualified lead conversion rate: The percentage of qualified leads that result in a closed deal.
• Customer acquisition cost (CAC): The total sales and marketing spend to close a deal.  
• Marketing qualified leads (MQLs) generated: Leads that have shown an interest and are more likely to buy. 

Payout on marketing plans could look like:

• Performance-based: Bonus tied to exceeding goals for lead generation or conversion rates. For instance, a bonus for achieving a 20% increase in MQLs.
• Campaign-specific: Bonus for successful marketing campaigns that achieve specific objectives such as brand awareness or website traffic.

Customer Success Bonus Structures

Customer Success Manager compensation plans can be a bit of a tossup. Let’s start with the most common metrics CSMs are held to.

• Customer retention rate:  The percentage of customers you keep compared to the amount you lose.
• Net Promoter Score (NPS): A measure used to assess customer loyalty, satisfaction, and excitement about a company based on a one-question survey inquiring how likely they are to recommend your product or company to a friend or colleague. 
• Customer lifetime value (CLTV): The total projected revenue a customer generates throughout their entire relationship with your company.
• Upsell/cross-sell success: Revenue generated from sales of more or additional products to existing accounts. 

Now, here are some ways you can pay out according to those metrics.

• Renewal Bonuses: Bonus based on exceeding customer retention targets. For example, a bonus for achieving a 95% renewal rate.
• Expansion Bonuses: Bonus for successfully upselling or cross-selling to existing customers such as a bonus for increasing average revenue per user (ARPU) by 10%.
• Customer Satisfaction Bonus: Bonus tied to achieving high customer satisfaction ratings like NPS scores.

Engineering Bonus Structures

It’s also a best practice to put your Sales Engineer or Solutions Engineer on a bonus structure. Some metrics within their control include:

• Project completion on time and within budget
• Bug fixes resolved
• Code quality
• Innovation and efficiency improvements 

As for structuring their payouts, consider:

• Project Milestones: Bonus for achieving key project milestones on time and within budget.
• Innovation Bonuses: Bonus for developing new features or improvements that significantly benefit the product or process.
• Team-based Bonuses: Bonuses awarded to the entire engineering team for achieving collective goals or overcoming major challenges.

Company Bonuses

Why not put your entire company on a bonus structure? This helps to align the entire organization toward a key metric of your business. Here are some examples:

Profit-sharing: Bonus pool based on exceeding company-wide profit goals, distributed proportionally among all employees.

Company Performance Bonus: Bonus based on achieving specific company-wide objectives, like reaching a certain market share or successful IPO. For example, at QuotaPath, we have a corporate bonus tied to our North Star metric which is a customer milestone within the product.

Setting Bonus Structure Best Practices

These best practices for setting bonus structure will help you prevent major missteps while boosting plan success.

Have a budget: Confirm that there’s room in the overall compensation budget or make the appropriate adjustments before implementing bonuses.

Test extreme payout scenarios: Leverage historical compensation data to test your new bonus structure. Then use pressure testing to prevent overpaying in comparison to annual recurring revenue.

Ensure the bonuses are attainable and competitive: Bonuses must be realistic, achievable, and competitive to be effective. Otherwise, they can backfire by demotivating employees. A couple of ways to gauge how realistic bonuses are is by using our Quota:OTE Calculator and reviewing industry averages to ensure your bonus structure is well aligned.

Ask for team feedback: Meet with qualifying team members to get their input and confirm these bonuses motivate them, otherwise they won’t drive the desired behaviors.

Communicate the structure clearly: Explain plan details in various formats including jargon-free documentation to increase team member understanding and adoption.

Conclusion

Well-designed bonus structures are essential in the highly competitive SaaS industry. They enable companies to attract, retain, and motivate employees while driving business goal achievement.

There are various bonus types and structure examples to suit your business objectives.

QuotaPath partners with organizations to set bonuses that align and drive performance to achieve your key business objectives while measuring outcomes and efficiently running payouts. Schedule time with a team member for help setting your bonus structures today.