Single Rate Commission with Contract Term Multiplier

Frequently asked questions

What is a multi-year contract?

A multi-year contract is a signed commitment from a customer to purchase services from a vendor for a period that extends beyond the first year. In SaaS, multi-year agreements are typically between 2 to 5 years.

How should I pay sales commissions on multi-year contracts?

It’s ultimately your call to do this or not, but we strongly encourage you to pay higher commission rates or bonuses on agreements that go beyond one year. This motivates and incentivizes your reps to ask for longer commitments, which equates to customers agreeing to pay you more over time. If your reps don’t get paid more on them, why would they ask for longer terms?

Why would I use a single rate commission?

We consider the single rate commission plans the simplest variable compensation plan out there. The math is simple to calculate and since reps easily understand their sales commission structure, they focus on closing deals rather than wasting time thinking about how to maximize their sales commissions.

How to find commission rate

To calculate the commission rate, take the variable pay that a rep earns for hitting their target ($50k a year, for instance) and divide that number by their target ($500k a year). So it would be $50k/$500k, which gives you .10 or 10% commission. Great work!

How does this plan differ from the Commissions with Multi-Year Accelerators plan?

Great question! The key difference between this plan and the the Commission with Multi-Year Accelerators Plan is that the rates in the latter change based both on length of contract and the rep’s quota attainment. In this plan, the fixed rates depend only on contract length.

What if I have multiple products?

Then this plan might not be for you, but it’s probably in the ballpark! If each of your products go toward the same quota and you want to pay the same rate on all products, this works great for you! However, if that isn’t the case and you want a Single Rate Commission with Contract Term Multiplier Plan for multiple products, you would need to add additional paths for each product. To calculate the commission rate for each of those paths, determine how much of a rep’s total variable compensation you want to dedicate per product. Then, divide that number by how much you want your rep to sell of that product.

How can reps see how much more they’ll make on multi-year deals?

They can manually calculate it, or, you can give them QuotaPath’s commission tracking and sales compensation software to do it for them. Real-time integrations ensure the data is accurate the most recent available, and our forecasted earnings tool enables reps to see how asking for a longer contract term impacts their next commission check.