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Sales Commission Glossary

The glossary is a collection of incentive compensation management terms designed for anyone seeking an understanding of what goes into planning and implementing effective sales compensation plans.

Need help with your sales commissions plan? Learn more about ZenCentiv.



An accelerator is applied to the Base Commission Rate and increases the commission payout when a certain quota attainment level is reached. Accelerators motivate your sales force to overachieve their quota.


For example, there is a 2x accelerator applied to a 10% commission base rate when quota attainment is over 100%.


Note: Sometimes an accelerator is referred to as a “Kicker”


Stands for Annual Contract Value and is the annualized amount of the total contract. For example, a 300K 3-year contract would have a 100K Annual Contract Value

Account Manager

A specific title of a salesperson who is responsible for direct sales in the company, and will be working with customers to close deals.


May also be known as “Account Executive”, “boots on the ground” or “hunter”.

At Risk Pay

Also known as Variable Pay or Incentive Target and refers to the non-guaranteed portion of compensation. At-risk pay is tied to individual performance measures such as quota, bonus, etc.


For example, person A is hired with a 100K base salary and 100K at-risk pay to achieve a 1M quota.


A general term to describe a commissionable person. Also known as a sales representative and is the person in the company who is responsible for closing deals.


Process of collecting data and applying logic to gather insights and information. Analytics is an important driver in understanding sales compensation plan performance and allows the business to course correct when certain trends are spotted.


Describes the salesperson’s achievement towards their quota. For example, if a salesperson reached 80% of their set quota, they’ve attained 80% of the quota.


Stands for Annual Recurring Revenue and is the amount of recognized revenue in a period. There can also be QRR (Quarterly Recurring Revenue) and MRR (Monthly Recurring Revenue).


Base Commission Rate

Typically calculated as At Risk Pay (variable)/Quota and is the calculated commission rate paid to the salesperson. The relationship between At Risk Pay and Quota guarantees that at 100% of quota attainment 100% of the variable is paid unless an accelerator or decelerator is applied.

Base Pay/Salary

The guaranteed portion of compensation. The amount is fixed and, unlike at-risk pay, is not tied to a quota. Base pay is determined by HR/Compensation teams and offered to employees at the end of the interview process.


Once a customer receives an invoice for agreed services, they are billed by the company.


Typically paid quarterly for performance not tied to specific deals or when a quota is difficult to set. A bonus can be tied to at-risk (variable) pay or on top as an extra incentive.


A booking occurs when a salesperson closes a deal. When a contract is signed by the customer and all required sales activities are completed the deal is considered booked.



Limit set on the amount of commission/bonus that can be earned from a single deal or in total.

Also, commission rates themselves can be capped to a certain maximum percentage.


For example, a cap of a maximum of 200K in total commissions can be earned for the year. Once the maximum 200K is earned, the salesperson will not receive any additional commission for the plan year. Another example is a cap of a maximum 30% commission rate that can be set on a commission plan.

Cash Collection

The guaranteed portion of compensation. The amount is fixed and, unlike at-risk pay, is not tied to a quota. Base pay is determined by HR/Compensation teams and offered to employees at the end of the interview process.


Commission/bonus recovered from the sales person due to a commission calculation error or customer returning the product or not paying for the services rendered by the company. For example, when a customer does not fulfill contractual obligations and misses an invoice payment, there may be a clawback for earned commissions.


Earnings paid to the salesperson based on their sales performance. Most often a percentage of each deal sold is paid back to the salesperson in a form of commission.

Commission Hold

The unpaid amount of commission held back until a future event. Often, commissions are held until the company collects cash for the deal sold.

Commission Rate

Typically represented in the form of a percentage and is a fixed rate given to the salesperson to apply against sales activity. For example, a given commission rate of 10% is applied to 200K in sales revenue, resulting in 20K in commissions.

Commission Rate Table

Is a summary of different commission rates applied to revenue based on different levels of quota attainment. For example, a Base Commission Rate is applied to deals closed between 0-100% attainment, a higher commission rate is applied to deals closed between 100-150% attainment, and yet another commission rate is applied to deals closed over 150% attainment. This payment structure would be visually presented in a commission rate table.

Commission Split

Allocation of the total deal between multiple salespeople. For example, a deal may be split 50%/50% between 2 direct salespeople.

Commission Split Agreement

An estimate of the total amount of commissions owed for the upcoming payment period. Commission accruals will often include any held commissions that will be paid out in the future.


General compensation manages and designs overall employee compensation structures, including salary, at-risk (variable), bonus, stock, and other forms of compensation. For example, the compensation team will establish the general salary bands to hire into each role at the company, including sales. It may be established that a typical Account Manager.

Compensation Plan

A detailed description of how the salesperson is expected to earn the variable (at risk) portion of total compensation. The plan will contain any assigned quotas, commission rates, and detailed terms and conditions.


Sometimes also referred to as an “Incentive Plan”.

Compensation Plan Design

The process by which company goals and compensation strategy are aligned into a compensation plan. Extensive modeling and benchmarking are used to create compensation plans to incentivize correct behaviors while reaching a company's sales target.

Compensation Strategy

General philosophy related to employee compensation. Effective compensation strategies will attract and retain the best talent.


Refers to Customer Relationship Management software such as SalesForce, SAP, Oracle, HubSpot, etc. These systems help companies manage their relationships with current and/or future customers and allow sales teams to keep track of their selling progress. ICM solutions will often extract sales-related data from CRMs to calculate commissions.



Opposite to an accelerator, a decelerator is applied to reduce the commission payout within a certain quota attainment range. For example, a company may choose to apply a 75% decelerator to the base commission rate within 0-50% quota attainment to incentivize the sales team to overachieve. It is common to grant an accelerator as part of the next achievable commission rate to make up the lost commission. Companies with easily attainable sales quotas may choose to decelerate the commission rate to motivate overperformance.

Direct Credit

Recognized amount of effort done directly by the person. Can be in a form of revenue, ACV, ARR, calls, meetings, etc. Direct credit is generally applied to quota for commission calculation.

Dispute Handling

A process by which a salesperson can resolve questions related to carve-outs, splits, applicable commission rate, etc. 


Sometimes referred to as an advance on commissions, draws can be “recoverable” or “non-recoverable” and provide the salesperson with regular cash payments while they build up their pipeline. Recoverable draws are offset against future commission earnings, while a nonrecoverable draw does not need to be paid back.

Draws can be calculated as a monthly value of the sales person’s variable (at risk) amount. For example, a salesperson with a 120K variable may be eligible for a 10K per month draw for the first 6 months.



A specific threshold that a salesperson must reach before another plan component is earned. For example, a salesperson is eligible to receive a 10% commission on any deal closed, but they need to reach a 70% quota attainment threshold before any commission payment is met (gate reached). Once the 70% quota threshold is met, they are paid all commissions owed.


Similar to a non-recoverable draw, a payment guarantee allows the salesperson to receive a commission payment without closing a deal.



The reporting structure within the sales organization. A hierarchy establishes teams and is based on a manager-employee relationship. Managers often earn commissions based on deals closed by their teams in the reporting hierarchy.



A motivational tool to reward employees to perform at their peak level. Sales teams use incentives, such as commissions and bonuses to drive performance.

Incentive Compensation Management (ICM)

Systems and practices supporting the calculation and payment of variable compensation (at-risk pay) to sales agents.

Indirect Credit

Sales credit received by a salesperson as part of the team. Sales Managers and other salespeople not directly involved in the deal often receive indirect credit toward their commission rate.


Key Performance Indicator (KPI)

A measure often used to calculate a bonus payment. KPIs can be objective or subjective and are set to align with a company's short or long-term goals.


Management by Objectives (MBO)

Similar to KPIs, MBOs set specific objectives that a person must reach to receive a bonus payment. MBOs are often set when accurate quotas are difficult to assign.

Merit Increase

Annual wage adjustment to salary. Typically within 3-5% annual increase to account for inflation and work performance. Increases can be higher due to exceptional performance. At risk pay portion of total compensation may or may not increase proportionately.


A process that determines various outcomes when new plan design elements are introduced or existing elements are changed.


On Target Earnings (OTE)

The total amount is paid to the person when all objectives are achieved. OTE is the sum of all possible earnings, including salary and variable amount. 


Pay Mix

Describes the OTE split between multiple forms of compensation. For example, a 70/30 split means that 70% of OTE would go towards salary and 30% towards variable pay.


Refers to any person receiving compensation under the assigned compensation plan.


Calculations often include a proration factor that takes into account the hire date of the person and/or seasonality of the sales cycle.



Also known as “Goal”, and is the expected amount of revenue that a salesperson is expected to achieve to earn commissions. If a portion of the quota is attained then a portion of the variable amount is paid.


Sales Performance Management (SPM)

Refers to a broad set of concepts and systems that provide visibility into and improvement to selling activities. Often ICM is part of the greater SPM and is treated as a subset of SPM. The main difference between ICM and SPM is that where ICM is focused primarily on incentivizing and rewarding the sales team, the greater SPM is focused on cohesive management of the sales process (including non-commissionable individuals), to achieve sales goals.

Sales Territory

Segmentation of all possible customers into manageable groups. Often territories are split geographically, and may also include sub-territories.


Sales often occur during specific times of the year that align with customer budgets and the overall sales cycle of the product. Often most sales occur in the third month of the quarter and closer to year-end.

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