Commissions on Renewals
What is renewal commission?
Renewal commission is commission paid on the revenue from an existing customer who continues their subscription. It typically runs at 4–5% of renewed ACV (ICONIQ GTM Compensation Guide (Aug 2025)) — well below the ~10% paid on new logo — and it is the single most-argued line item in SaaS compensation.
The argument is not really about the rate. It is about whether renewals should be commissioned at all, and it has one clean answer that both sides keep talking past.
The debate, settled
The case against paying on renewals: "The customer was going to renew anyway. Paying commission on it is paying twice for the same sale."
The case for: "If renewals aren't compensated, reps shouldn't be expected to close them."
Both are correct, and they are answering different questions. The resolution is empirical, not philosophical:
What this means?
Does a human being have to do work for this renewal to happen? If yes, that work must be paid for, and the only question is the rate. If no — the renewal is automatic, contractual, and requires no intervention — then it is not a sale and paying commission on it is a gift.
Most SaaS renewals sit firmly in the first category. Someone has to have the conversation, handle the procurement cycle, defend against a competitor, and justify the price increase. That is sales work. It gets paid, or it does not get done.
Renewal commission benchmarks
Account managers who own a renewal book typically run a 60/40 or 70/30 pay mix, with commission on renewal and expansion ACV at 5–10%.
Who owns the renewal?
This is the decision that actually determines whether the plan works, and it is upstream of the rate.
The last row is not a strawman. It is the default state of a plan that never addressed renewals — and companies routinely find themselves surprised that a renewal book they never compensated is not being worked.
The upsell trap
A renewal at $100,000 that expands to $130,000 contains two things: a $100,000 renewal (4%) and $30,000 of expansion (10%). Paying a single blended rate on the $130,000 either overpays the renewal or underpays the expansion.
Most plans blend, because it is simpler. The result is a rep who is indifferent between renewing at flat and renewing with an upsell — which is precisely the behaviour that flat blending was supposed to avoid.
Why renewal commission matters for finance teams
Renewal revenue is the cheapest revenue in the business: no CAC, high margin, and it is the base of net revenue retention — the metric a SaaS board watches most closely. Paying 4–5% to protect it is a rounding error against the cost of replacing a churned customer.
Under ASC 606, renewal commission is treated differently from new-business commission. Commission on an initial contract is a cost of obtaining that contract, capitalized and amortized over the expected customer life. A renewal commission may be a cost of obtaining a new contract (the renewal term) — but if the renewal commission rate is not commensurate with the initial rate, guidance suggests the initial commission should be amortized over a period that anticipates renewals. This is a genuine and frequently mishandled judgment, and the commission rate you choose is one of its inputs.
Common mistakes with renewal commission
1. Paying nothing, then expecting renewals to be worked
Reps do what the plan pays for. That is the plan working, not the rep failing.
2. Blending renewal and expansion into one rate
It makes the rep indifferent between the two outcomes you care most about distinguishing.
3. Not naming the owner
If the plan does not say whether the AE or the AM is paid on the renewal, both will assume they are, and one of them will be told otherwise at payout.
How Visdum handles renewal commission
Visdum applies renewal, expansion, and new-logo rates automatically from CRM deal type — so a $130,000 renewal-with-upsell is split into its $100,000 renewal component and $30,000 expansion component and commissioned at the correct rate for each, without anyone splitting the record by hand. The crediting rule (originating AE, current account owner, or a defined split) is configured in the plan, so "who gets paid for this renewal" is answered by the system rather than in an email thread. And because renewal commission is a distinct component, its ASC 606 treatment stays separable from new-business commission through close.
Take a self-guided product tour →, or explore the Visdum platform.
Related terms
Residual Commission · ARR-Based Commission · Crediting Model · B2B SaaS Sales Commission · ASC 606
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Frequently asked questions
Should sales reps be paid commission on renewals?
If a human has to do work for the renewal to happen, yes. Someone must have the conversation, handle procurement, defend against a competitor, and justify the price increase — that is sales work, and it gets paid for or it does not get done. If the renewal is genuinely automatic and requires no intervention, it is not a sale and commission on it is a gift.
What is a typical renewal commission rate?
Around 4–5% of renewed annual contract value, roughly half the new-logo rate. Account managers who own a renewal book typically run a 60/40 or 70/30 pay mix, with commission on renewal and expansion ACV in the 5–10% range. Renewal rates are lower because the sales motion required is genuinely smaller.
Who should get the renewal commission — the AE or the account manager?
Whoever actually works the renewal, and the plan must name them. If the AE retains the account, paying them the renewal creates a strong incentive to sell to good-fit customers — and a weak incentive to prospect new logos. If an AM or CSM owns it, the AE optimises for closing and the AM for keeping. Both models work; ambiguity does not.
How should renewal-with-upsell be commissioned?
As two components. A $100,000 renewal that expands to $130,000 is a $100,000 renewal (at ~4%) plus $30,000 of expansion (often at the full new-logo rate). Blending them into a single rate on $130,000 either overpays the renewal or underpays the expansion, and makes the rep indifferent between renewing flat and renewing with an upsell.
Why do companies avoid paying on renewals?
The usual argument is that the customer was going to renew anyway, so commission on it is paying twice for the same sale. That is sometimes true and usually not. The test is empirical rather than philosophical: if the renewal required work, it required a salesperson, and salespeople are paid on commission.
How is renewal commission treated under ASC 606?
Differently from new-business commission, and it is a frequently mishandled judgment. Commission on an initial contract is capitalized and amortized over the expected customer life. Where a renewal commission is not commensurate with the initial commission, guidance suggests the initial commission should be amortized over a period that anticipates renewals — so the renewal rate you set is an input to your amortization schedule.