Commission Threshold
TL;DR: A commission threshold (also called a payout floor) is the minimum performance level a rep must reach before any commission is paid. Below the threshold, the rep earns base salary only. A plan with a 70% threshold pays zero commission until the rep hits 70% of quota, then the commission formula begins.
What is a commission threshold?
A commission threshold is the starting line a rep has to cross before commission switches on. It is set as a percentage of quota, a dollar amount, or a unit count. Most B2B SaaS plans set it between 50% and 80% of quota.
Below the line, the rep earns base salary only. Once they cross it, the commission formula begins to pay. You will typically see it written into the commission plan document as a clause like "no commission is paid below 70% of quota."
A simple example to understand it:
Meet Jordan, an Account Executive. His plan looks like this:
- Annual quota: $1,000,000
- Commission threshold: 70%
- Commission rate: 10% on bookings, once the threshold is cleared
Here is what he earns at different performance levels:
What this means?
Until Jordan sells $700,000 (70% of his quota), he earns no commission at all, only base salary. The moment he crosses that line, commission switches on and he gets paid on his bookings. The threshold is simply the starting line he has to cross before commission begins.
If you are a rep reading your own plan, the practical takeaway is simple: find your threshold first, because every dollar of performance below it pays you zero commission.
Why do companies use a commission threshold?
A threshold is a financial control. It protects the commission budget by not paying for performance the business treats as a baseline expectation.
The tradeoff is behavioral. Every rep below the line has nothing left to chase, so a threshold set too high can cause weaker reps to disengage for the rest of the period. The decision is not whether to use a threshold, but where to set it without demotivating the 40% to 50% of reps who finish below quota in a typical plan.
Threshold vs cliff vs floor
Note: "Payout floor" sometimes means the opposite of a threshold, a guaranteed minimum commission paid regardless of performance. This entry covers the dominant usage: the entry point a rep must clear to start earning. The guaranteed-minimum sense is the "Floor (guaranteed)" row in the table below.
A threshold also works alongside an accelerator: the threshold sets the floor where commission begins, and the accelerator sets the point where the rate increases. Many plans use both.
Common mistakes when setting a threshold
1. Setting it too high:
Above roughly 80% of quota, reps who fall behind early give up for the entire period.
2. Confusing a threshold with a cliff:
A cliff erases retroactive payout once cleared. A plain threshold may pay from the first dollar.
3. Forgetting the dead zone:
Everyone between zero and the threshold earns the same commission, which is nothing, so there is no incentive gradient down there.
How Visdum handles thresholds
Threshold logic is where spreadsheet commission models break first, because the rule has to check every rep's attainment, every single period. Visdum applies threshold, cliff, and floor conditions automatically inside the commission engine. Finance can model the budget impact of moving a threshold before it ships, and reps see exactly why a payout did or did not trigger.
Take a self-guided product tour → to see threshold and quota logic in action, or explore how Visdum handles commission automation.
Frequently asked questions
Is a commission threshold the same as a cliff?
No. A cliff is a stricter threshold that pays nothing retroactively once cleared. A standard threshold may pay from the first dollar once the rep crosses the line.
Is a payout floor the same as a commission threshold?
It depends on usage. Most often, "payout floor" and "commission threshold" mean the same thing: the minimum attainment a rep must reach before commission starts. Less commonly, "floor" refers to a guaranteed minimum commission paid regardless of performance. Always confirm which sense your plan document intends.
What is a typical commission threshold?
Most B2B SaaS plans set thresholds between 50% and 80% of quota.
Does a rep earn anything below the threshold?
Yes, but only base salary. No commission is paid on performance below the threshold.