The pay mix ratio could be the biggest call you’ll make about compensation. The way you divide up the percentages between base salary (that’s the fixed part) and variable pay (the performance-based part) has a big effect on almost everything, and it changes who wants to apply for your open roles, how aggressive your reps get when they chase the deals and if your business can take care of the natural ups and downs in revenue. When the ratio is off, the incentives stop working the way they should – your best performers are underpaid, or you get stuck with fixed costs that your business can’t support.
Most sales teams out there just copy whatever their competition is doing without ever taking a real look at their own sales cycles, how involved their deals are or what actually drives the results for their business. A large software company with 9-month sales cycles can’t use the same 50/50 split that works for a transactional inside sales team that closes deals in a matter of days! Your pay mix structure directly changes the cash flow, hiring speed and quota attainment across your entire team, and at the end of the day, whether your sales organization is profitable or just turns into an expensive cost center.
Let’s talk about how you calculate and optimize your sales team’s pay mix ratio!
How to Split Base and Variable Pay
Pay ratio is how you divide up compensation between base salary and variable pay for a sales team. Most businesses use some version of this split to balance fixed income with performance-based earnings. A 60/40 split is fairly common – it means 60% of what a sales rep makes comes from their fixed base salary, and the other 40% comes from commissions or bonuses that are based directly on their performance.
An example will probably help make this concept clearer. Let’s say you plan to hire a sales rep at $100,000 in total target pay. With a 50/50 compensation mix, that rep would earn $50,000 as their base salary and another $50,000 in variable comp – but only if they actually hit their targets. Adjust the split to 70/30, and the same rep receives $70,000 locked in up front, with just $30,000 based on their performance.
The way that you structure this split is going to have a big effect on the type of salespeople you bring in. A higher base salary will appeal more to reps who value stability and want to know what their paycheck will look like each month. But if your compensation package is weighted more heavily toward variable pay, you’ll pull in a different type of rep – the ones who don’t mind some uncertainty if it means they can make a lot more money when they hit their numbers.
This split also has an effect on how your salespeople work each day. A higher variable portion will make your entire team more focused on hitting their numbers and closing deals as fast as they can. But a higher base salary gives your entire team a lot more breathing room to actually build relationships with customers and work through those longer sales cycles without worrying all the time about where their next commission check is coming from.
The financial pressure shifts based on how you structure the split. A higher base salary forces your company to commit more cash up front, regardless of sales performance. A higher variable portion transfers more of the income uncertainty to your sales reps. What your company gains from that trade-off is flexibility – you can align compensation more directly with the results that your entire team delivers.
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Sales Cycle Length and Your Pay Mix
Deal velocity is one of the biggest factors when you’re figuring out how to structure your compensation plan, and most businesses don’t give this enough thought from the start. If your sales reps are working with a 9-month sales cycle on average, they’d be working on a single deal for the better part of a year before they ever see a commission check from it. In situations like this, you’re probably going to want to lean toward a higher base salary – something like a 60/40 or a 70/30 split in favor of base makes a lot more sense. Your reps still have bills to pay and rent to cover during the months when they’re nurturing deals that might not close until 2 or 3 quarters later.
Inside sales reps work on a different timeline. When they close deals in just days or weeks, a 50/50 or a 40/60 commission split works out fine for them. The money shows up fast enough that it still feels connected to the deal they just closed. Most of them are still excited about the win when that commission check hits their bank account.
This creates two separate problems for sales reps that work on long sales cycles – one that’s mental and one that’s purely about their household finances. Their income becomes unpredictable, and it can swing from one month to the next without much warning. A deal that was supposed to close in March might get pushed out to June, and just like that, their entire spring income is gone. When your paycheck can fluctuate that dramatically, it gets tough for them to plan ahead for regular monthly bills like a car payment or childcare costs.
A strong base salary helps to smooth out those swings and gives your reps the financial cushion they need to actually sell instead of stressing about whether they can cover the rent this month. Sales cycles that span 2 or 3 quarters happen all of the time, and your base salary needs to line up with the length of these cycles. If your entire team is working through longer deals, the base should be higher to help them stay financially stable throughout the process.
Shorter sales cycles also create much faster feedback loops between effort and results. A rep who closes 10 deals per month will know pretty fast what’s resonating with customers and what’s not landing. The pitch might need some work, or maybe the qualification process needs some adjustment – whatever the adjustments are, the commission check is going to show it to them pretty quickly. When the cycle moves this fast, variable pay no longer feels like a distant, abstract concept and instead feels like an accurate scorecard of their day-to-day performance.
How fast commission checks actually land in a rep’s bank account matters quite a bit for compensation satisfaction. Short commission cycles let you lean harder on variable pay because the rep gets their money as they still remember the work they put in to earn it. Longer cycles need a stronger base salary to bridge those gaps and stop your best performers from walking out the door before their pipeline finally converts.
The Right Pay Mix by Role
Sales compensation isn’t the same across every role on your entire team, and the pay structure that makes the most sense is going to depend on what each person actually does all day. SDRs and BDRs, say, usually do better with a 70/30 split (that’s 70% base salary and 30% commission). These roles focus mainly on outreach and booking meetings for account executives – they don’t take care of the deal closings themselves. A higher base salary gives them the financial cushion they need as they’re still learning and improving at what they do.
Field sales reps work a little differently, though. You’ll usually see them on a 50/50 commission split, and it’s pretty fair if you think about what they’re doing. These reps own the entire sales cycle – everything from that first phone call or meeting right through to closing the deal. A balanced split makes plenty of sense in this case because they have a lot more control over the outcome compared to other sales roles. Even with all that control, new business still has its share of variables that nobody can predict.
Channel partners are a bit different. A 30/70 split is pretty standard in their world, and it means the majority of their compensation is variable pay. They’re independent business owners – they manage their own pipelines, work their own territories and work with a lot of autonomy. All that variable pay makes sense because their income does depend directly on their own effort and results.
Sales engineers work under yet another compensation model. Most places put them at an 80/20 split, and it means the majority of their income comes from base salary instead of variable commission. A sales engineer is there to give technical expertise and to support whatever deals are in progress – not to close anything. The value they add to the sales process is there, and it matters. It’s just a different type of contribution if you compare it to quota-carrying roles, where the rep is directly responsible for revenue.
Customer success roles usually follow a similar split, and most of them fall between 80/20 and 90/10 for retention work versus new business. Those in these roles spend almost all their time keeping existing customers happy and finding ways to expand those existing accounts. What makes them great at customer success is that they stay steady and build trust over months or years – not that they close lots of new deals every quarter.
When Variable Pay Actually Works
A pay ratio that looks perfect on paper won’t automatically improve anyone’s performance. The question is whether your variable component is large enough to actually change how your sales reps think about their work every day.
Variable pay can be a strong motivator for your sales team when the percentage is high enough to matter. Studies are showing that it needs to make up around 20% to 25% of the total compensation before it starts to change how your reps work. Anything below that threshold, and it will just seem like another bonus check. Your entire team will be happy about the extra money when it lands in their account – it’s not going to change their day-to-day behavior or push them to work any harder than they normally would.
One quick way to test your own plan is to just ask yourself whether a rep would change what they do day-to-day to earn that bonus money. Think about whether they’d make an extra call or work harder to close a deal before the quarter ends. When you’re honest with yourself, and the answer is no, that variable pay probably isn’t working the way it should.
A heavier base salary, like a 70/30 split, still needs some real upside on the commission side. The accelerators that kick in once reps cross their quota have to be big enough that your whole team actually cares about hitting them.
Token variable pay is dangerous because it creates a lot of work without giving you any real results. You’ll spend time and money to track performance and calculate what everyone gets paid – you won’t see your reps change behavior in response to those small amounts. At that point, it makes more sense to just roll that money into the base salary and skip the administrative headache completely. Variable pay needs to be big enough to actually change behavior, or you shouldn’t bother with it at all.
Let New Hires Pick Their Plan
A handful of businesses have come up with a pretty solid way to take care of the whole pay structure question – they let new hires actually choose their own compensation plan. Instead of giving everyone the exact same deal, these businesses will present candidates with three different options that have different base salary and commission splits. One package could be 70/30, another one comes in at 60/40, and the third one sits at 50/50.
It tends to work well because no two candidates are in the same financial position. A candidate with a mortgage and kids at home is usually going to lean toward the plan that comes with a higher steady base salary with less variable commission on top. When bills need to be paid each month, predictable income turns into a much bigger priority. But a rep who’s got some savings in the bank and a strong track record of hitting their numbers time and time again might go for the plan with a lower base but a way higher commission upside.
This benefit pays off in competitive hiring markets when a few businesses are all going after the same talented salespeople. With a flexible structure, you’re not forcing everyone to fit into one rigid mold. What this does is allow you to meet each candidate where they are, because each one is coming from a different situation with their own needs and considerations.
This also means a lot more work for your payroll department. When you have a few reps doing the same job but each one is on a different pay structure, it gets way harder to track and manage that compensation.
The added effort is probably worth it for most businesses. Giving them this choice shows candidates that you get what they need and their personal situation actually matters to your organization. It’s a great way to land more talented salespeople – especially the ones who would have passed on a standard one-size-fits-all deal.
You want to find that balance between giving candidates the flexibility they want and still being able to manage the moving parts on your end.
Level Up Your Incentives and Rewards
Every sales team is different, and no single pay split will work for everyone. The right answer for you depends on how long your sales cycle runs, what each role on your entire team actually does day-to-day and what your competitors pay to similar sales talent in your area. A fast-moving inside sales team that closes deals in days or weeks is going to need a very different compensation setup than large account executives who spend 6 months (or longer!) working on a single deal. Your pay split doesn’t have to be perfect from day 1, and you can always make changes later – it acts more like a dial that you can turn and adjust as your company grows and changes.
Industry benchmarks give you a decent starting point for your compensation structure. You learn the most about pay plans by rolling one out and seeing how everyone on your entire team reacts to it. Performance numbers will start to show patterns across the organization, and your reps will tell you (one way or another) what motivates them and what leaves them frustrated. These two sources of information matter just as much (the data you’re seeing in your reports and the informal feedback you’re hearing from your entire team), and if you look at them together, you’ll know when something needs to be adjusted. Teams that do this well don’t set their pay split one time and walk away from it. You should review and adjust it as you go – it’s part of the process.
The right pay split should accomplish two main goals: it needs to bring in talented salespeople who want to work for you, and it needs to motivate them to do the behaviors that grow your business over time.
At Level 6, we help businesses move way past the standard commission setup. We work with businesses to drive stronger sales and to build better morale across the team through branded debit cards, employee rewards and recognition programs and sales incentive plans that match the way your company actually works.
Contact us for a free demo, and we’ll show you how we help high-performing businesses get more out of their sales teams.
Claudine is the Chief Relationship Officer at Level 6. She holds a master’s degree in industrial/organizational psychology. Her experience includes working as a certified conflict mediator for the United States Postal Service, a human performance analyst for Accenture, an Academic Dean, and a College Director. She is currently an adjunct Professor of Psychology at Southern New Hampshire University. With over 20 years of experience, she joined Level 6 to guide clients seeking effective ways to change behavior and, ultimately, their bottom line.
