Sales Compensation Glossary

A higher commission rate increases a sales representative's compensation relative to what she would have earned at her base commission rate. Kickers are accustomed to rewarding excellence. Typically, they are activated when a sales representative meets his or her quota. Jennifer will earn $10,000 if she meets her quota of $100,000; therefore, her base commission rate is 10%. Once Jennifer reaches their goal, her commission rate will increase to 12 percent to provide an additional incentive for her to continue her outstanding performance.

Line of Business refers to business segments that can be distinguished by the products and services sold, the size of the client base, the demands of the customer base, the distribution channel, and the brand.

Long-term incentives are compensation plans that reward and retain key employees for achieving specific performance goals over an extended period, usually several years. They usually take the form of equity-based awards such as stock options or restricted stock units and aim to align the interests of employees with those of the company's shareholders to encourage long-term commitment to the company's success.

Management by Objectives is a way of enabling managers and team members to collaboratively identify common performance goals.

The non-recoverable draw is a type of compensation arrangement in which a salesperson receives an advance on their future commissions, and is not required to pay back the advance if their commissions do not exceed the amount of the draw. This provides the salesperson with a guaranteed source of income but can be risky for the company if the salesperson does not generate enough commissions to cover the cost of the draw.

Everything on-demand refers to software as a service that requires little to no installation and may be accessed quickly through the Internet.

Conventional software applications or programs must be installed on a device or piece of hardware within the actual location of a business.

On-Target Commissions (also known as OTE On-Target Earnings) refer to the amount paid to a payee if all their targets have been achieved.

On-Target Earnings (or simply Target Earnings) refers to the amount a payee receives if all of their targets are met. The compensation earnings of a salesperson are comprised of base salary and variable compensation plans components such as bonuses and commissions.

A sales commission override is a type of indirect payment, comparable to a roll-up, in which an employee receives a percentage of the commission for a transaction made by another employee. For example, a product manager might indirectly receive a 2.5% override on their products sold by sales representatives, even though the representatives do not work for them.

A pain point is a specific issue (such as with a product or service) that annoys prospects as they progress through the sales funnel. Customers may encounter issues with online research, website navigation, product cost and availability, checkout, multi-channel shopping, tracking, and delivery, among other things.

Pay mix refers to the proportion of a salesperson's total compensation that consists of salary and commission. It is the ratio between basic compensation and incentive targets. A 70/30 pay mix, for instance, indicates that 70% of total on-target earnings are fixed base salaries and 30% of total on-target earnings are variable commissions.

Participants or Payees are persons or individual entities whose compensation is variable dependent on their performance as specified by the Incentive Compensation Management system.

Sales incentive plans are made up of several components, such as commission rates, territories, quotas, gates, periods, etc. to calculate how much payees are remunerated.

A communication strategy is a road map meant to offer stakeholders a clear, precise message about a newly introduced product or service. It specifies who should receive specific information when they should receive it, and via what communication channels. An agreement between a client and a manager that specifies the tasks and criteria to be met to get the final approval from the client after the project is called an acceptance plan.