Average Sales Commission Explained

Sales commissions are meant to give your salespeople the incentive to sell and earn more — but sometimes they can have the opposite impact. So what's the magic commission rate to guarantee that your sales team meets its quotas?

Unfortunately, there isn't one.

Finding the right sales commission rates for your business is challenging because every company's commission rates are influenced by several factors. As founder of the Harris Consulting Group , I've worked with thousands of clients and have had the benefit of witnessing what works well — and what doesn't.

Offering above the average sales commission rate is the best way to gain a competitive edge for your business and your sales team.

We'll walk through a few key considerations and best practices in this article.

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Sales commission represents additional money sellers can earn above their base pay by achieving specific goals. Commission-based pay is designed to motivate your team to sell and earn more. An individual seller's earnings potential is determined by the commission structure and established company sales commission rates. Beyond the short-term impact on revenue, sales commission rates influence loyalty and your business' ability to retain top sales talent over the longer term.

Commission structures often vary by role. For example, a commission structure for a sales development representative (SDR) will be different than the structure for an account executive (AE).

Here are a few common sales commission pay structures:

This common structure combines a guaranteed annual salary with variable performance-based earnings. The commission portion can range anywhere between 5-30% of the sales value, depending on the industry. Once a seller understands all the requirements, objectives, and target metrics laid out for their position within a year, they can project their on-target earnings.

Example: Let's say a software sales rep earns a base salary of $75,000 plus 10% commission on all sales. If they sell $600,000 worth of software in a year, they earn $75,000 + $60,000 = $135,000 total.

This model pays out a percentage of the total price or sales value in lieu of fixed income. To compensate for the lack of a base salary, commission rates tend to be higher, as high as 15-50% of the total value.

Example: Real estate agents typically work purely on commission. So if an agent earns 6% on each property sold, then the sale of a $500,000 house yields $30,000 in commission. The pressure to sell is on because they earn nothing without a sale.

Sales reps earn ongoing commissions for the duration of the time a client continues using a product or service. This rewards salespeople for creating long-term customer relationships, and is more common in SaaS and subscription-based businesses where there is recurring revenue.

Example: Insurance agents may earn a 10% commission on an initial policy sale and then 5% on each annual renewal. For a $2,600 annual premium, they'd earn $260 initially and then $130 each year the client renews — which can continue for decades.

Commission rates increase as sellers reach milestones, motivating them to continue selling past their targets. Tiered commission structures may also sit on top of a base salary.

Example: Let's say a pharmaceutical sales rep earns:

• 5% commission on sales up to $100,000
• 7% on sales from $100,001 to $250,000
• 10% on sales above $250,000

So if they sell $300,000 worth of medications or devices to medical providers, they earn:

($100,000 × 5%) + ($150,000 × 7%) + ($50,000 × 10%) = $20,500 total in commissions

Salespeople receive an advance, which they must pay back by earning commissions. This structure provides some financial security up front and is often used when sales cycles are longer and require more time to build relationships and sales pipeline.

Example: A digital advertising sales representative at a media company receives a $3,000 monthly draw against a 15% commission rate on ad space sold. In a month where the rep sells $45,000 in digital advertising:

• Commission earned: $45,000 × 15% = $6,750
• Draw received: $3,000
• Additional payment received: $3,750

However, in a month with only $15,000 in sales:

• Commission earned: $15,000 × 15% = $2,250
• Draw received: $3,000
• Deficit: -$750

This model can be risky, especially if the draw is too high and it becomes difficult to meet quotas. The following month, the rep would need to earn enough commission to cover both the new $3,000 draw plus the $750 deficit before receiving any additional commission.

Pro tip: As you build your compensation plans and set commission rates for each sales role on your team, I recommend setting goals that are within each individual seller's control. An easy example is to reward an SDR for setting up a certain number of meetings. If, however, the SDR isn't compensated unless that deal moves to a qualified opportunity, then their compensation rides on the success of the AE during the meeting. You can always add bonuses or incentives that reward the entire team's performance, but each individual salesperson should have some control over how much they can potentially earn.

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Your sales team is only going to be as loyal as its ability to make a commission, which is why your sales commission rates must be both competitive and fair.

While it can be tempting to set commission rates by simply pulling from another company's playbook, that doesn't usually work. Your business is its own; your commission rates need to reflect that.

Here are some factors to consider when setting commission rates:

The market environment (both within your industry and more broadly) affects how easy or difficult it will be to sell your product or service. If the conditions are good, it will be easier to book meetings and close deals, and commission rates can be lower. But if the market is tough, it's generally wise to raise commissions to motivate sales teams to go the extra mile.

Industries with high competition must compete for customers — and for sales talent. If you're in a crowded market, offering higher commission rates helps attract top sellers. This is important because your sales talent drives revenue and growth. They're also the face of your company. If prospects have better interactions with your competitors, you can be sure they'll win the business.

Your compensation plans must align with company goals. For example: If you expand into a new market, then you may need to tie a high commission rate to the business goal — and potentially reduce incentives for selling into a market where you're already a market leader. Think about whether your business goals are more aligned around revenue or profit, customer acquisition or retention, or accelerating sales for a specific product.

Company size can heavily influence commission rates. Startups or smaller companies may offer higher commission rates to compensate for lower salaries, but sometimes, this isn't possible. Larger companies with established brands may offer lower commissions in exchange for more benefits and stability. Enterprises have more flexibility to design complex compensation plans, with commission caps in sales to manage expenses.

This ties back to the market environment. If your sales velocity is already strong, commission rates don't need to be as high, as deals are easier to close. But if you're struggling, you might consider increasing commission rates to motivate reps and boost revenue. Some businesses also face seasonality challenges, in which case you might offer higher rates during off-peak times to maintain consistent sales.

Commission rates tend to be higher in regions with a higher cost of living. There are also considerations around market maturity. If you're selling into a new market, commissions might be higher to encourage expansion. Also, keep in mind that there may be regulations and laws in different regions that affect how commissions are structured or taxed.

Pro tip: Before you roll out your commission rates, get buy-in from your most seasoned sellers. This is vital to setting your team (and business) up for success. Your top sellers can provide feedback on whether your compensation plans are both clear and motivating and help poke holes in proposed plans. Overall, if your reps need to use a spreadsheet for commission calculation, it's safe to say that you're doing it wrong.

Understanding average sales commission benchmarks in your industry can be a good starting point for developing your pay structure. If your commission rates are competitive, you stand to attract and retain top talent — a great strategy for outselling your competition.

According to Glassdoor's Sales Commission Salaries page, average annual commission earnings by industry are as follows. Note that these numbers are for "all years of experience" and that there will be significant variance for entry-level vs. senior roles and across regions.

• Retail and wholesale: $99K/yr median total pay, with a base pay range of $59K - $97K/yr and a commission range of $17K - $32K/yr
• Financial services: $182K/yr median total pay, with a base pay range of $90K - $157K/yr and a commission range of $47K - $88K/yr
• Pharmaceutical and biotechnology: $90K/yr median total pay, with a base pay range of $58K - $91K/yr and a commission range of $13K - $25K/yr
• Healthcare: $106K/yr median total pay, with a base pay range of $64K - $105K/yr and a commission range of $18K - $34K/yr
• Manufacturing: $119K/yr median total pay, with a base pay range of $71K - $116K/yr and a commission range of $21K - $40K/yr
• Real estate: $84K/yr median total pay, with a base pay range of $52K - $83K/yr and a commission range of $13K - $25K/yr
• Information technology: $165K/yr median total pay, with a base pay range of $88K - $153K/yr and a commission range of $37K - $69K/yr
• Energy, mining and utilities: $103K/yr median total pay, with a base pay range of $59K - $101K/yr and a commission range of $19K - $36K/yr
• Telecommunications: $91K/yr median total pay, with a base pay range of $55K - $92K/yr and a commission range of $15K - $28K/yr

These numbers provide a sense of the percentages between base pay versus additional pay sellers might earn — if you're using this commission structure. Industry benchmarks are tricky because standard percentage rates by industry can be tied to any number of factors, such as gross margins, total contract value, or revenue. B2B sales in technology and SaaS, for example, can range anywhere from 5% to 20% of the total contract value. This is why it's important to dig deep into your industry and competition to discern what's best for your business.

Pro tip: When you're creating compensation plans, don't begin with complexity. The goal is to have a high percentage of your team meeting their quotas. According to the latest Salesforce State of Sales Report, only 28% of sales professionals expect to hit their quotas — that's not ideal. You don't want to make your commission rates so easy to attain that the whole team meets targets, but if perhaps 70% of the team hits quotas and your organization is more than sustainable at that rate, that's closer to ideal.

In my experience, one of the best ways to understand what's happening within your industry is to talk to people. Learn from interviews what a salesperson's previous experiences were like and what made them decide to move on from their last role. You can also utilize sales compensation statistics, or tools from career sites like the Sales Commission Salaries page referenced above. Perusing a sales ratings and review platform may also provide industry insights and tools to help determine average sales salaries by job role within your city.

That said, it's important to go beyond data that is rep-reported. Stay familiar with sales industry annual reports like the State of Sales, The Bridge Group's 2024 SaaS AE Metrics & Compensation Benchmark Report , or the Betts Recruiting 2025 Compensation Guide .

Incentive management compensation software can also help you track all your teams' sales activities and ensure that they're aligned to key business priorities.

Pro tip: Create a board of advisors made up of people who understand and see commission structures on a regular basis, but who are not tied to the outcome. These advisors can help relay things that you may not like to hear, and also help create some space between the decisions you need to make and the emotions that accompany those decisions. Your personal board should be diverse and help you to consider perspectives that are different from your own.

Ultimately, the commission rate you offer must be realistic within the context of your business goals. Rates also need to be competitive. Your sales team wants to hit their targets (or get close) and get paid. At the same time, your sales team can't make up for overspend in other areas of the business or conditions beyond their control. The real challenge is to align your sales commission rates with your company's overarching goals, and to ensure that the incentives feel clear and exciting to your sales team.

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