How to Structure Sales Commission in an ASX-Listed Company in 2026

Sales commission plans have a habit of looking perfectly sensible in a spreadsheet and becoming much more complicated once real sales start coming through.

This is particularly true in an ASX-listed company.

The basic objective is no different from any other business. You want salespeople focused on winning profitable business, and you want them to share in the upside when they perform well.

The difference is that a listed company needs to think a little harder about what it is actually rewarding.

A salesperson signing a $5 million contract sounds like a great outcome. But the size of the contract alone doesn't tell you whether it was a good deal.

What was the margin? Was heavy discounting required? Is the customer likely to pay? Are there unusual termination rights? How much of the sale was genuinely generated by the salesperson? And, perhaps most importantly, would the company still be happy with the deal if there were no commission attached to it?

These are the questions that should shape the commission plan.

Start with OTE, not the commission percentage

One of the most common ways to design a sales plan is to start by asking, "What commission percentage should we pay?"

I would start somewhere else.

First decide what you want a good salesperson to earn when they deliver the performance expected of them.

For example, an Enterprise Account Executive might have:

The next question is what the salesperson needs to achieve to earn that $120,000.

Assume the annual target is $2 million of new eligible revenue.

Now you have the foundations of the plan:

$150,000 base salary

$120,000 target commission

$270,000 OTE

$2 million annual target

From there, you can work out the commission mechanics.

This is much more useful than picking a 5% or 10% commission rate in isolation.

Make 100% of target mean something

If someone achieves 100% of a properly established sales target, they have done what the company asked them to do.

The commission outcome should reflect that.

In our example, 100% achievement should result in approximately $120,000 of commission and therefore $270,000 of total on-target earnings.

The bigger question is what happens next.

If the salesperson gets to $2 million in October, you probably don't want them deciding there isn't much point closing another deal until January.

This is where accelerators work well.

The company might pay the normal commission rate up to 100% of target, then increase the rate between 100% and 125%, with another accelerator above 125%.

The exact percentages matter less than the principle.

If somebody materially exceeds a credible target, their remuneration should increase meaningfully.

Don't put in a cap just because a large commission payment feels uncomfortable

This comes up surprisingly often.

A salesperson has an exceptional year. The commission calculation produces a very large number and suddenly everyone becomes uncomfortable.

"Surely we can't pay someone $400,000 in commission?"

Maybe you can.

The first question should be what the company received in return.

If an employee generated $15 million of additional, high-margin business that the company would not otherwise have won, a $400,000 commission payment may be an excellent commercial outcome.

This is why commission plans should be modelled before they are introduced.

Calculate what someone would receive at 50%, 100%, 150%, 200% and even 300% of target.

If management would refuse to pay the amount generated at 300%, deal with that when designing the plan.

Don't wait until somebody has actually achieved it.

But protect the company against genuine windfalls

Uncapped commission doesn't mean every mathematical outcome needs to be accepted without question.

Imagine a salesperson normally has a $2 million target.

The company acquires another business during the year and, as part of the acquisition, a $25 million customer contract effectively lands in the salesperson's territory.

The standard commission formula could produce an enormous payment even though the salesperson had relatively little involvement in generating the transaction.

That is different from genuine exceptional sales performance.

For this reason, I like having an exceptional commission review.

For example, any commission payment above 200% of target incentive could require additional review by the CFO and relevant executive.

That shouldn't mean the payment is automatically reduced.

It means someone independently checks the result.

Was the revenue correctly attributed?

Did the salesperson genuinely originate or materially contribute to the sale?

Was the required margin achieved?

Were normal approvals followed?

Is there any duplicate commission credit?

Is this genuine outperformance or a windfall created by something outside the employee's control?

If everything checks out, pay it.

Be very clear about what counts as a sale

This is where many commission plans fall apart.

A contract has been signed. Has the salesperson earned commission?

Maybe.

Some companies pay on contract signature. Others pay on invoicing. Others wait for customer payment.

There isn't one rule that works for every business.

What matters is defining it before the sale happens.

For an ASX-listed company, I would also make sure the definition works with the company's Finance and revenue-recognition processes.

You don't want Sales saying a $3 million deal has been completed while Finance is saying only $500,000 currently qualifies as revenue.

Sales credit and accounting revenue don't necessarily have to be identical, but everyone needs to understand the difference.

Revenue isn't always the right measure

A pure revenue plan works well where salespeople have limited ability to influence profitability.

It becomes more problematic when they can heavily discount.

Consider two deals.

One produces $1 million of revenue at a 45% margin.

Another produces $1.3 million at a 10% margin.

Under a simple revenue commission plan, the second deal receives the larger commission.

Commercially, the company may strongly prefer the first one.

There are a few ways to deal with this.

You could pay commission on gross profit instead of revenue.

You could require a minimum margin before normal commission applies.

Or you could reduce commission when discounting exceeds agreed parameters.

For many businesses, a simple margin gate works well because employees can still understand the plan without needing a finance degree to calculate their commission.

Think about what type of revenue you are rewarding

Not every dollar of revenue requires the same sales effort.

Winning a completely new customer is different from renewing an existing customer who has been with the company for ten years.

You might therefore give full sales credit for new business, lower credit for expansion revenue and considerably lower credit for straightforward renewals.

For example:

These percentages are only examples.

The important thing is to look at the actual sales model.

If retention is strategically critical and genuinely requires substantial work, renewals may deserve a much greater weighting.

The commission plan should reflect the business rather than copying a structure used somewhere else.

Don't make the plan too clever

Sales commission plans often become complicated because every stakeholder wants to add something.

Sales wants revenue.

Finance wants margin.

The CEO wants strategic products.

Customer Success wants retention.

Risk wants conduct.

Suddenly the salesperson has seven KPIs, four multipliers, three gates and a spreadsheet nobody understands.

At that point, the incentive has stopped doing its job.

A salesperson should be able to explain, in fairly simple terms, what they need to do to earn more money.

Something like:

"I have a $2 million new-business target. I earn my target commission at $2 million. My rate increases above target. Deals need to meet our minimum margin, and exceptional transactions are reviewed."

That's understandable.

Sales managers should not necessarily be on the same plan

Another mistake is taking the salesperson commission structure and giving a slightly larger version to the Sales Director.

Their jobs are different.

The Account Executive is primarily responsible for closing business.

The Sales Director is responsible for making the whole sales function perform.

That can include recruitment, coaching, forecasting, pricing discipline, pipeline quality and team productivity.

A Sales Director might therefore have an incentive based on team revenue and margin rather than receiving commission on individual transactions.

For example:

The more senior the role becomes, the more likely it is that a broader incentive plan will make sense.

Be particularly careful when the salesperson is an executive

This is an important distinction for an ASX-listed company.

A front-line salesperson receiving commission is one thing.

A senior executive or KMP participating in a material incentive arrangement is another.

Once the role forms part of the executive remuneration framework, the company needs to consider its broader remuneration governance, disclosure and approval arrangements.

It may no longer make sense to treat the executive as simply a highly paid salesperson.

A Chief Revenue Officer, for example, may be better rewarded against a combination of revenue, earnings, margin, cash generation and strategic outcomes than receiving a percentage of every contract signed.

The remuneration structure should evolve with the accountability of the role.

Don't reward bad behaviour

This sounds obvious, but it should be built into the plan.

A salesperson should not be able to produce exceptional financial results through serious misconduct and then argue that the commission formula means the company has no choice but to reward them.

The plan should contain appropriate conduct provisions.

That might cover serious breaches of the Code of Conduct, fraud, deliberate misrepresentation, unauthorised discounting or other significant breaches of company policy.

This doesn't need to turn every commission payment into a Risk Committee meeting.

It simply means there is a sensible mechanism for dealing with situations where the financial result and the way it was achieved tell very different stories.

Finance should check the numbers

Sales shouldn't mark its own homework.

Before commission is paid, someone independent of the salesperson should validate the underlying result.

Usually that means Finance, Sales Operations or both.

The process doesn't need to be complicated.

Start with eligible sales.

Remove cancellations and ineligible transactions.

Apply any split-credit arrangements.

Confirm margin requirements.

Apply the commission rates and accelerators.

Check exceptional transactions.

Then send the approved amount to Payroll.

That process also gives the company a useful audit trail if an employee later challenges their commission.

Deal with split sales before people start arguing about them

Large deals often involve several people.

One employee finds the lead.

Another runs the sales process.

A technical specialist helps close it.

An Account Manager owns the existing relationship.

Without clear rules, everybody understandably believes they contributed to the sale.

Decide how sales credit works before this happens.

Perhaps one salesperson receives 100% credit.

Perhaps it is split 70/30.

Perhaps the Account Executive gets the individual commission while the manager benefits through their team target.

There is no universally correct answer.

There does need to be an answer.

Write down what happens when someone leaves

This is another area where disputes appear.

An employee spends nine months working on a major transaction.

They resign.

The customer signs two weeks later.

Do they receive commission?

The answer depends on the commission plan and applicable employment arrangements, which is precisely why the company should deal with the issue before it occurs.

The plan should clearly explain what happens to deals in progress, earned but unpaid commission, post-employment customer payments and any other relevant leaver circumstances.

The same applies to cancellations, refunds and bad debts.

Get appropriate employment-law advice when drafting these provisions rather than improvising after someone resigns.

A structure I would actually consider

For an ASX-listed B2B business, a front-line Enterprise Account Executive plan could look something like this:

It is not particularly sophisticated.

That's partly why I like it.

The salesperson knows what matters.

Finance can calculate it.

Management can model it.

And there are enough controls to deal with unusual outcomes without interfering with ordinary commission payments.

Model the ugly scenarios before approving the plan

Don't just model what happens when everybody performs exactly as expected.

Ask what happens when someone sells three times their target.

What happens if a salesperson lands one enormous deal?

What happens if gross margin collapses?

What happens if half the team misses target?

What happens if a $10 million customer cancels?

What happens if two salespeople claim the same transaction?

What happens if someone resigns the day before a contract is signed?

What happens if there is serious misconduct after a large commission has been calculated?

These scenarios are much easier to discuss around a table before the plan starts than after $300,000 of commission is in dispute.

The biggest test is surprisingly simple

When we review commission structures, one question is particularly useful:

If a salesperson performs exceptionally well under this plan, will the company genuinely be happy to pay them exceptionally well?

If the answer is no, something is wrong with the design.

Maybe the target is too low.

Maybe the accelerator is too generous.

Maybe margin hasn't been considered.

Maybe the company is worried about windfall transactions.

Whatever the concern is, deal with it upfront.

An ASX-listed company needs appropriate governance around sales incentives, but governance shouldn't mean creating a commission plan nobody trusts.

The best structure is still relatively simple.

Set a credible target. Pay competitively for achieving it. Provide meaningful upside for genuine outperformance. Protect margin. Define unusual situations before they occur. Have Finance validate the result. Apply additional governance where payments become exceptional or the participant is a senior executive.

Then, when somebody has a genuinely outstanding year, the conversation should be straightforward.

They created significant value for the company.

The commission plan worked exactly as intended.

Pay them.