SaaS Sales Compensation Benchmarks 2025

The competition for top talent in Software-as-a-Service (SaaS) sales is fiercer than ever. With sales expectations increasing, how do you ensure your compensation plans stay competitive? 

In 2025, knowing and implementing the latest trends in SaaS sales compensation is crucial for retaining the best talent. In fact, 9 out of 10 of your sales reps can leave your company because of a poor compensation structure. 

That’s why if you don’t keep up, you risk losing out on top performers. So, how do you stay on track?

In this section, we’ll explore the correct SaaS sales compensation benchmarks that you can apply in 2025. Don’t let outdated strategies cost you. Read on to make sure your sales team is set up for success.

TL;DR

• SaaS sales compensation is motivated based on performance with salary, commissions, and bonuses.
• Regular reviews ensure alignment with sales and market trends.
• Track quota attainment, deal size, lead conversion, and retention for compensation metrics.
• Avoid complicating plans, over-relying on base pay, and changing plans mid-year.
• Use historical data and industry benchmarks for compensation design.

What is a Sales Compensation Plan Structure in SaaS?

Many sales managers have assumed that a compensation plan doesn’t need to account for different performers. What have they seen? A lack of motivation from the majority of their team. 

That’s why a multi-tiered incentive structure can change everything. To create a sales compensation plan, here are your 4 dos:

1. Design a Multi-Tiered Compensation Plan 

Typically, about 20% of your team will be overachievers. The remaining 80% might need extra motivation to excel. Multi-tier compensation plans target these varying levels of performance to boost the potential of the broader team. 

2. Provide Tools to Estimate Earning Potential

One of the best ways to motivate sales reps is by helping them visualize their earning potential. Providing tools that allow them to simulate Annual Contract Value (ACV) and different payment structures can be powerful. 

Reps should be able to input deal details, such as payment terms or contract length, and see how these variables affect their compensation. This transparency helps salespeople align their personal financial goals with company objectives.

3. Ensure Commission Payouts Within 60 Days

Behavioral psychology shows that timely formative feedback is one of the most powerful motivators. If a sales rep closes a deal, they want to see the financial rewards sooner rather than later. 

Commission payouts made within 60 days of the outcome keep reps focused and motivated. The longer the wait, the more detached they become from the effort.

4. Balance Incentives with Non-Cash Recognition

While monetary rewards are crucial, they shouldn’t be the only form of motivation. Incentives alone can start to lose their effectiveness over time, especially when reps are consistently hitting their targets. 

Balance this with non-cash recognition and meaningful rewards such as badges and a personalized gift card for top performers. These non-monetary rewards reinforce the desired behaviors and build a positive culture. 

Struggling to build a compensation plan that motivates your team and drives results? Activated Scale’s Fractional Sales Leadership service offers expert guidance to design a sales compensation plan. 

You’ve got the framework for creating a strong sales compensation plan, but it’s not enough to just structure it right. To stay competitive in 2025, you need to set compensation benchmarks that reflect the latest market trends.

7 Essential SaaS Sales Compensation Benchmarks for 2025

Nowadays, quotas and On-Target Earnings (OTE) are rising year after year. Updated benchmarks can provide the clarity you need on these metrics. Without these insights, you could be missing out on top talent or, worse, losing your best performers. Here’s a list of seven key benchmarks driving success:

1. On-Target Earnings (OTE)

For most roles, OTE can range between $150,000 and $250,000, depending on experience and sales role. Usually, the OTE for AEs is 20% of its quota.

This indicates that compensation packages for sales teams are becoming more generous in response to higher expectations and sales targets.

The typical split ratio between base salary and variable pay is 44:56 in the U.S. This structure encourages AEs to meet sales goals while providing them with a stable income.

2. Quota-to-OTE Ratio

Generally, the Quota-to-OTE ratio is 4:1 to 6:1. This means that for every dollar of OTE, reps are expected to generate 4-6 times that in sales revenue. 

This reflects the sales targets set for all the reps and their earnings potential. A higher ratio indicates that the sales targets are aggressive and will require strong performance.

3. Commission Rates

Commission rates can vary based on the value of deals, with typical rates ranging from 11% to 14% of ACV. Companies focusing on high-value contracts or long-term contracts may offer slightly higher commission rates.

The median commission rate is 11.5% of Annual Contract Value (ACV) at 100% quota attainment.

4. Base Salary Ranges

• Base Salary for SDRs: $57,739 on average.
• Base Salary for AEs: $101,250 on average.

Base salaries reflect a rep's experience and role. Sales development reps (SDRs) generally earn lower base salaries compared to account executives (AEs).

Because AEs are responsible for closing deals and driving revenue. On the other hand, SDRs focus on lead generation only. The regional variation also plays a significant role in base salary levels.

5. Compensation During Onboarding/Training

• Non-recoverable draw: New hires receive compensation during training, paid upfront against future commissions. For example, it is $6,667/month for the first three months.
• Recoverable draw: Paid upfront but deducted if sales targets are not met.

Onboarding and training periods often leave new sales reps without immediate sales results. Draws provide financial stability during this period, ensuring reps are compensated while they ramp up.

6. Performance Metrics 

Key performance indicators (KPIs) are crucial in determining how well your sales team is performing and how effectively they are incentivized. Sales reps should be compensated based on specific KPIs. For example, new customer acquisition, revenue growth, and customer retention, etc. 

For example, AEs should be rewarded for revenue generation, and SDRs might be rewarded for conversion rates.

7. Sales Cycle Length

Sales cycles for lower-value deals or smaller accounts tend to be shorter, typically 1-3 months. For such deals, it's effective to implement monthly quotas with quick feedback loops. Offering monthly commission payouts ensures reps are motivated to close deals quickly.

Enterprise sales and high-value contracts often come with a longer sales cycle (3- 6+ months). For these roles, particularly for senior AEs, annual quotas may be more appropriate. Quarterly or annual commission payouts can help maintain motivation throughout a drawn-out sales process.

So, SaaS sales compensation benchmarks require a clear structure and alignment with business goals. However, even the best plans can fail if not executed properly. 

How do we prevent that from happening? We will find that out in the next section.

Common Pitfalls in Sales Compensation Plans

Just as there are key dos to follow, there are also important don'ts to avoid when creating benchmarks for a compensation plan. So, while it's tempting to simplify everything, this plan is only effective when it drives the right behaviors. That’s why we have created this list, so you can stay aware:

1. Don’t Over-Simplify

• A basic model doesn’t capture the complexity of your sales strategy or align with your business goals. 
• Prioritize alignment with company objectives over simplicity to drive the right behaviors. 

2. Avoid Having a High Base Pay

• It’s tempting to offer high base salaries to attract talent, but too much fixed compensation can demotivate top performers.
• When too much of a sales rep’s income is guaranteed, there’s less incentive to perform at a high level. 

3. Never Change Compensation Plans Mid-Year

• Changing compensation plans mid-year is one of the quickest ways to destroy trust with your sales team. 
• When compensation structures change unexpectedly, it creates uncertainty and demotivates reps. 
• Consistency and clarity are key to maintaining a motivated sales force.
•  If you need to make adjustments, plan ahead for the next cycle and ensure changes are communicated in advance.

4. Don’t Set Unrealistic Quotas

• Setting unrealistic quotas is one of the most common mistakes in sales compensation planning. 
• Sales reps need challenging yet achievable targets to stay motivated.

Keeping these don'ts in mind will ensure your plan brings both performance and trust across all roles. 

Avoid the common mistakes and build a compensation strategy that truly motivates your sales team. At Activated Scale, experts from our Fractional Selling service can help you design a plan accordingly.

So, how do successful businesses plan their compensation structure with these challenges? The answer lies in knowing that market standards validate your plan.

How to Validate Benchmark Data?

A well-designed sales compensation plan does more than just reward your sales team. It needs approval. You must ensure that you drive revenue while strict guidelines are still in place. For that, here’s what you need to know:

1. Use Data-Driven Insights: Check historical performance data to set realistic quotas and compensation structures. This means using insights from past sales data from your own inventory.  
2. Use Industry Reports: To ensure your compensation plan is competitive, use established research sources like Gartner, Forrester, etc. Look for segmented data based on factors like company size and sales roles to create relevant benchmarks.
3. Consult Third-Party Experts: Engaging compensation consultants or industry experts can provide external perspectives on your sales compensation plan. Their insights will help you make necessary adjustments as your company grows.

If there are gaps between expectations and actual payouts, use these plans to refine your compensation strategy. 

Read Also: Hire Fractional AE: The Ultimate Guide for Businesses

Final Thoughts

Designing a compensation plan requires a combination of the right benchmarks and a strong understanding of the market. You need to be extra cautious while meeting industry standards and motivating your team. Because misalignment in these two can generate loyalty issues among your employees.

To be honest, the journey is not easy. Especially in SaaS, where every day is a new challenge, your best bet is to outsource a sales rep. That’s where Activated Scale steps in.

If you're looking to refine your sales compensation strategy, consider working with Activated Scale. Book a call today to get started creating relevant benchmarks with the right guidance.

FAQs

1. What is a SaaS sales compensation plan?

‍A structured approach to rewarding sales teams based on performance, including base salary, commissions, bonuses, and other incentives.

2. Why align sales compensation with business goals?

‍Aligning compensation ensures your sales team focuses on what matters. It is driving growth in areas like customer acquisition and retention.

3. How do I determine the right compensation mix?

‍Consider the role and your business goals. SDRs usually get higher base pay, while AEs have a commission-heavy structure to drive performance.

4. How often should I review compensation plans?

‍Review plans quarterly or annually to stay aligned with market trends and sales performance.