A multi-tier sales compensation structure is a type of sales compensation plan that uses multiple levels of commission rates to reward salespeople for their performance. In a multi-tier structure, salespeople earn a base commission rate on all sales. However, they can also earn additional commission if they meet or exceed certain sales goals. These additional commissions are typically paid at a higher rate (or multiplier) than the base commission rate.
There are several benefits to using a multi-tier sales compensation structure.
First, it can help to motivate salespeople to perform at their best. By offering the potential for higher commissions, companies can encourage salespeople to sell more products or services, to sell to new customers, or to sell more expensive products or services.
Second, a multi-tier structure can help to create a sense of competition among salespeople. When salespeople know that they can earn more money by performing better, and see their teammates receiving higher payouts, they are more likely to work harder.
Third, a multi-tier structure can help to reward top performers. By paying higher commissions to salespeople who meet or exceed their goals, companies can show their appreciation for their hard work and dedication. This ultimately improves morale and retention among the sales team.
Here is an example of a multi-tier sales compensation structure:
Base commission rate: 5%
Tier 1: 10% commission on sales above $100,000
Tier 2: 15% commission on sales above $200,000
Multi-tier sales compensation structures can be a very effective way to motivate and reward salespeople.
However, it is important to design the structure carefully to ensure that it is simple, logical and fair for all salespeople.
Check out Compensation Hub to discover, explore, and customize multi-tier commission structures and templates.