Sales quotas and commission gates are compensation mechanisms that can seem pretty similar the first time you compare them, so any uncertainty between the two makes plenty of sense. These tools look like they accomplish almost the same purpose, and each one acts as a checkpoint that determines if the money flows to your sales team. A quota and a gate will push your reps toward some behaviors and steer them away from others. The distinction between these two depends on the metrics each one tracks and where they fit into your compensation structure.
When you mix these up, it can be expensive, and it happens all of the time with comp plans. Thresholds and gates control different parts of your commission structure. With a threshold, your sales team has to hit a minimum percentage of the quota before they’ll see any commission at all. Gates are different – they’re a requirement that has to be met before the reps can unlock specific bonuses or incentive pieces, and this happens regardless of where they are on their quota. Get them confused, and you’ll run into problems fast. Use a threshold in a situation where you actually need a gate, and your reps will abandon deals that would have been perfectly fine revenue – all because those deals fall outside of a very narrow performance window. Use a gate when you actually need a threshold, and you might pay out commissions on revenue that doesn’t even cover what you’re spending on that rep’s salary and overhead.
Now let me talk to you about these two compensation terms, so you know how to use them!
How Sales Compensation Thresholds Work
A threshold is the minimum sales target a salesperson has to reach before they can earn any commission at all, and it acts as a starting line for commission earnings – until a rep crosses that threshold, no extra money gets added on top of their base salary. Once they get past it, though, the commission structure kicks in, and they can start earning more on each sale.
Most businesses express their threshold as a percentage of whatever your quota is. The most common range tends to fall somewhere around 70% or 80%, though every company sets it up a bit differently. Say your quota is set at $1 million and your threshold sits at 75% – you’re going to have to bring in at least $750,000 in order to start earning any commission at all.
Thresholds make plenty of sense from where the company sits. Each salesperson costs money to have them on the team – base salary, benefits, office space and the other overhead that goes into employment. Businesses need to be sure that their reps bring in enough revenue to at least cover these baseline costs before any variable pay kicks in on top of that. It’s a protection mechanism – a way to avoid losing money on commissions when someone’s total sales haven’t even covered what it costs to have them employed.
Thresholds can be tough on you when you’re running a sales team. The all-or-nothing structure splits up team members into two very different camps. Some salespeople actually do well under that type of pressure – it keeps them sharp and motivated to hit their numbers. Other team members find it to be stressful because there’s no partial credit for coming close or putting in the work.
When your entire team falls just short of that threshold percentage, nobody walks away with anything extra to show for that period. Miss the mark by a small margin or miss it by a mile – in either case, the outcome is the same. The threshold structure has a massive effect on team motivation, and it’s one of the design calls that can change how everyone on your entire team feels throughout an entire quarter.
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How Gates Work in Your Pay
Gates and thresholds might sound similar. But they actually work pretty differently for your compensation plan. A gate is a checkpoint that you have to pass so you can earn some parts of your pay. With a threshold, you just need to hit a minimum level of performance, and then you start to get paid. Gates are different – they’re more like prerequisites that have to be satisfied before any of that compensation is available to you.
Gates are a little different because they measure a few factors at the same time instead of just one. Your company might set it up so your customer satisfaction score stays above a set number as you also hit your activity targets and keep your deal margins above a set percentage. All three of these pieces have to line up correctly so you can unlock that part of your compensation.
It makes more sense with an example. Say that you have a quarterly bonus that’s a part of your compensation plan. Your company might put a gate in place where you’ll need at least a 4-star average customer rating for the whole quarter. You can get the full bonus even if your sales numbers don’t quite hit where you’d want them to be, as long as you hit that rating threshold.
You could hit record sales numbers during the quarter and still lose your bonus if the customer ratings fall below that 4-star threshold. A gate cares about the quality of your work just as much as it does about the quantity.
How Thresholds and Gates Work Differently
Thresholds and gates show up in variable pay structures, and we’ve already covered what each one does on its own. What separates them is how they apply to your compensation. Thresholds are going to hit your entire variable pay in one shot – either you meet the threshold, or you don’t, and that single result determines your entire payout. Gates work differently because they unlock pieces of your compensation package one at a time.
Thresholds and gates work pretty differently when you get down to it. A threshold is usually tied directly to revenue or quota attainment. Before any of your variable pay starts to come in, that percentage needs to be hit first. Gates are more flexible with what they measure. A gate can track any behavior or outcome that happens to matter to the business at the time.
The timing piece is another real difference between them. Thresholds will reset whenever your quota period resets, and maybe on a monthly basis, a quarterly basis or on any timeframe that your company happens to use. Gates are a different story, though – they can work on a separate schedule. Some of them run all of the time, and others use measurement windows that aren’t connected to your quota period at all.
A company might set up a 70% revenue threshold that applies to commission earnings. That same company could also add a customer retention gate that only applies to quarterly bonuses. You’d need to meet these conditions – just at different times and for different reasons. The threshold is there to protect your base commission structure and make sure it stays steady throughout the year. The gate is what determines whether you actually qualify for that extra bonus money on top of everything else.
Sales reps need to track these types of requirements separately in whatever system they use. Each one runs on a different schedule and measures different metrics. Missing a threshold means you lose access to your main variable pay. Gates work differently – missing one means you lose out on a separate reward completely.
The Math Behind Your Commission Payout
Thresholds and gates sound like similar concepts. But they’ll affect your paycheck very differently. A threshold acts like an all-or-nothing switch for your entire commission structure. If your compensation plan has a 75% threshold and you finish the quarter at 74% of your quota, you won’t earn a single dollar in commission on those sales.
Managing to hit 76% means you’ll actually earn commission on that full 76%. It’s called a retroactive payout, and it means a big amount of extra money in your pocket. When you cross that threshold, the commission gets recalculated on every sale that you made since the beginning of the period. We’re talking way back to your first dollar of sales.
Another type of plan works with prospective payouts, and the structure here is a bit different. With prospective payouts, you only earn commission on sales that go above your threshold – not on everything you’ve sold to get there. Say that your threshold sits at $100,000 and you finish the period at $110,000 in total sales. Your commission gets calculated on just that extra $10,000. All of the sales until you hit that $100,000 mark earn you nothing in commission.
Gates work with different math. With a gate structure, the payout unlocks when you hit a specific threshold. Say that a gate might unlock a $5,000 quarterly bonus when you hit 80% of quota. A sales rep who finishes at 85% of their number gets that $5,000 payout. Another rep who does really well and hits 150% of quota also gets just $5,000. Gates are pass or fail – you either meet the threshold, or you don’t.
Accelerators are another part of commission plans, and they can make the payout structure a bit more complex. A lot of companies use them to reward their top performers with better commission rates as they sell more. Let’s say you’re earning a 5% commission rate on all sales through 100% of your quota. When you hit that 100% mark, the rate might jump to 7% on everything that you sell between 100% and 125% and then it could move to 10% on any sales above 125%. Every tier in the plan pays at a different rate, and the tier that you fall into is what determines your payout.
Once you put all these structures together, they can create vastly different earnings for your sales team. Two reps could hit the exact same quota number. But one of them might take home a lot more money than the other one. The difference depends on how their compensation plans are set up – specifically, which thresholds, gates and accelerators each plan uses.
Pick the Right Sales Structure for Your Team
The best time to use a threshold versus a gate is based on how your sales team is structured and what types of deals they close day-to-day. Sales teams that work with quick, transactional deals usually do better with lower thresholds somewhere in that 60% to 70% range. When you set it lower like that, your reps can hit their commission targets faster and more often throughout the year. That keeps them motivated and interested in the program.
SaaS businesses and subscription-based businesses move away from traditional thresholds and rely more heavily on gates. When these businesses design their compensation plans, they care just as much about customer retention rates and upsell percentages as they do about new accounts they land. An existing customer who stays subscribed matters just as much as a fresh one you sign. A sales rep can hit all their targets for new customers, but still walk away without their full commission check if too many accounts cancel in the first few months.
Inside sales teams and field sales teams need different gate structures. Inside reps will usually have gates that are based on activity metrics like call volume or demos scheduled. Field reps get gates that focus more on deal quality and profit margins, and each role needs a different measurement style since the work itself is so different.
Market maturity matters as well when you decide how to structure these tools. If your entire team sells into a brand-new market, then lower thresholds make plenty of sense because you want your reps to start to see wins right away. Established markets where the business already flows steadily work fine with higher thresholds or stricter requirements, and they won’t hurt team morale. The best strategy is to match your compensation structure to what your reps actually work toward and how long it’ll realistically take them to hit those goals.
The Top Mistakes with Thresholds and Gates
Set thresholds too high and you’ll lose your middle performers before they can build any momentum. A rep who needs to hit 85% of quota just to earn their first commission dollar will pull up their numbers around month two and see that they’re nowhere close to making it. At this point, most of them will mentally check out. Once they’ve given up on the goal, you’ve lost their effort for the rest of the quarter or maybe even the entire year.
Gates can become a big problem if you pile too many of them into a single sales plan. Your sales team won’t have a real sense of which metric is actually the top priority anymore. With five or six different gates all competing for attention in the same plan, your salespeople get stuck trying to figure out which one to chase first. Uncertainty like this doesn’t last for long – usually it just turns straight into inaction.
Another common mistake happens if you tie gates to metrics that your sales team has zero control over. Asking them to hit a company-wide customer satisfaction score or maybe meet a product launch target that marketing actually owns will just frustrate everyone involved. Commission gates work best when your salespeople move the needle on whatever metric they’re being measured against.
Change your thresholds or gates in the middle of a performance period, and you’ll lose trust with your entire team faster than just about anything else you could do. Your sales team made their decisions about where to spend their time based on the original setup that you gave them. Move the goalposts, and you tell them that their planning was a waste of time. And some states won’t even let you make these kinds of mid-stream changes to commission structures.
One of the weirder problems shows up when your plan sends mixed messages about performance. A sales rep might hit every one of the gates but come up just short of the threshold. Flip it, and another rep blows past the threshold but misses one of the gates. In either case, your reps get confused about whether they did well or not. A solid compensation plan should tell one single story about performance and not leave your entire team trying to guess which metric matters.
Level Up Your Incentives and Rewards
These mechanisms have a big effect on how your salespeople spend their time each day and the results that your company ends up with. A threshold that’s set too high might accidentally push your entire sales team toward closing smaller deals fast instead of going after bigger opportunities. A gate that’s too restrictive could kill the motivation for reps who perform well in other areas. When you get these elements dialed in correctly, your sellers will work on the activities that actually move your business forward.
At this point, you have everything required to review your existing compensation structure and see if any adjustments would help. It’s worth checking if your entire team’s behavior actually lines up with what you’re trying to accomplish as a company. When they don’t match up, it’s usually a sign that your thresholds and gates could use some fine-tuning.
Compensation plans that drive performance and results are what Level 6 does every day. Employee recognition programs, performance bonuses, team rewards – we help you design and set up programs that make sense for your particular company and industry. Our services include branded debit cards, employee rewards and recognition programs and customized sales incentive setups. We build everything with one goal in mind – to get your entire team more involved, motivated and productive.
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.
