Sales commission is a variable pay component paid to sales representatives based on the revenue or number of deals they close. Commission is the primary performance incentive in B2B sales: it aligns the sales team's financial interest with the company's revenue goals by rewarding the behaviours that drive growth.
In B2B sales, commission plans are almost always part of a broader On-Target Earnings (OTE) structure: the total compensation a rep earns if they hit 100% of their quota. OTE = Base salary + Target commission. A typical split for B2B SaaS is 50/50 (half base, half variable at quota), though it ranges from 60/40 to 40/60 depending on role, seniority, and market.
How to calculate sales commission
The most common commission calculation: Commission = Revenue closed x Commission rate. If the commission rate is 10% and a rep closes INR 20 lakh in the quarter, commission = INR 20,00,000 x 10% = INR 2,00,000. Most B2B commission plans include accelerators: higher commission rates for performance above quota (for example, 10% for 0-100% of quota and 15% for every rupee above quota).
Common B2B sales commission structures
- Straight commission: the rep earns a percentage of every deal with no base salary. High risk for the rep, high reward for performance. Rare in B2B SaaS where deals have long cycles.
- Base + commission: the most common B2B structure. The rep receives a fixed base salary plus variable commission on deals closed. Provides income stability while maintaining performance incentive.
- Tiered commission: the commission rate increases as the rep closes more revenue. For example, 8% on the first INR 10 lakh, 12% from INR 10 to 20 lakh, 15% above INR 20 lakh. Motivates high performers to push beyond quota.
- Revenue commission: commission based on total revenue closed. Straightforward and easy to calculate.
- Gross margin commission: commission based on gross profit rather than revenue. Discourages heavy discounting because lower-margin deals earn lower commission.
- ARR or ACV commission: common in SaaS. Commission is paid on Annual Contract Value (ACV) or Annual Recurring Revenue (ARR) added, not on monthly deals. Aligns the rep's incentive with the long-term value of the business.
Commission structures for SDRs
SDRs (Sales Development Representatives) typically do not close deals, so their commission is based on different metrics: meetings booked that show up (not just scheduled), opportunities generated that enter the sales pipeline, and sometimes a small component tied to meetings that close (to align SDR incentives with deal quality). Typical SDR commission in India ranges from INR 50,000 to INR 2 lakh per quarter depending on target market and company stage.
What is a good commission rate in B2B sales in India?
Commission rates in Indian B2B sales typically range from 5 to 15% of deal value for Account Executives, depending on deal complexity, ACV, and OTE split. For mid-market B2B SaaS with ACV of INR 5 to 20 lakh, 8 to 12% commission is common. For enterprise deals with ACV above INR 50 lakh, commission rates tend to be lower (3 to 7%) because deal values are larger and the total commission per deal is still significant.
Frequently asked questions
- What is sales commission?
- Sales commission is variable pay earned by salespeople based on the revenue or number of deals they close. Commission aligns the sales team's financial interest with company revenue goals. In B2B, commission is typically part of an On-Target Earnings (OTE) structure: base salary + target commission. If a rep hits their quota, they earn their full OTE.
- How is sales commission calculated?
- Sales commission = Revenue closed x Commission rate. If the rate is 10% and a rep closes INR 25 lakh in the quarter, commission = INR 2.5 lakh. Most plans include quota-based accelerators: higher rates for performance above quota. Some plans pay commission on Annual Contract Value (ACV) or gross margin rather than total revenue.
- What is OTE in sales?
- OTE stands for On-Target Earnings. It is the total compensation a sales rep earns if they hit exactly 100% of their quota. OTE = Base salary + Target commission. A rep with OTE of INR 24 lakh and a 50/50 split earns INR 12 lakh base and INR 12 lakh in target commission (paid quarterly or annually). Most B2B SaaS companies offer OTE split between 40/60 and 60/40 depending on role.
- What is a typical sales commission percentage in India?
- In Indian B2B SaaS sales, commission rates for Account Executives typically range from 8 to 12% of deal ACV for mid-market deals. For enterprise deals with high ACV, rates are lower (3 to 7%) because the absolute commission per deal is still large. SDRs earn commission based on meetings booked or pipeline generated, typically INR 50,000 to INR 2 lakh per quarter at quota.