Finding the Right Balance: Base vs. Variable Pay for Sales Teams

When structuring compensation for go-to-market (GTM) roles, companies often rely on a mix of base pay and variable pay. This combination is designed to drive the right behaviors while ensuring sales professionals are motivated to achieve their targets. But how do you determine the right mix? Should it be a 70/30, 60/40, or 50/50 split? The answer depends on multiple factors, including company goals, deal cycles, and industry norms.

Because it’s the internet and you can never be sure who’s reading these blogs or how much existing knowledge they have on the subject, I’ll start with a few definitions.

What Is Base Pay?

Base pay is the fixed portion of an employee’s salary. It provides financial security, stability, and consistency. For sales roles, base pay ensures employees can cover their living expenses even in slower sales periods. A higher base can be a strategic choice for companies looking to prioritize job security and long-term retention over aggressive short-term sales performance.

What Is Variable Pay?

Variable pay, also known as incentive compensation, is the portion of an employee’s salary that is performance-based. It’s typically tied to achieving sales quotas, closing deals, or meeting revenue goals. The purpose of variable pay is to directly align a salesperson’s earnings with company success, driving motivation and results. Variable pay works best in roles where performance can be clearly measured and directly impacts revenue.

What Is OTE (On-Target Earnings)?

OTE, or on-target earnings, is the total expected compensation if an employee meets their sales targets. It’s the sum of base pay and variable pay, offering a clear view of potential earnings. However, OTE assumes a rep will hit 100% of their quota, which isn’t always the case.

Choosing the Right Pay Mix

There’s no one-size-fits-all approach to balancing base and variable pay. The right split depends on your company’s industry, sales cycle, and objectives. Below are some common approaches and when they work best.

More Base, Less Variable (e.g., 70/30)

Best for: Companies with long sales cycles, enterprise deals, or relationship-driven selling.

Pros:

• Provides financial stability for sales teams.
• Reduces pressure, allowing reps to focus on building long-term relationships.
• Helps retain top talent in industries where sales cycles are unpredictable.

Cons:

• Lower incentive for high performance.
• May not attract highly competitive sales professionals.

Balanced Split (e.g., 50/50 or 60/40)

Best for: Companies that want to maintain stability while keeping incentives strong.Pros:

• Ensures a stable income while still motivating performance.
• Encourages a balance of relationship-building and closing deals.
• Works well for most mid-market and SaaS sales roles.

Cons:

• Reps may feel they need a larger base for security.
• Requires careful quota-setting to ensure earnings potential is realistic.

More Variable, Less Base (e.g., 40/60 or 30/70)

Best for: Companies looking to drive aggressive sales growth, often in high-velocity sales environments.Pros:

• Strongest incentive for sales performance.
• Higher earning potential for top-performing reps.
• Tightly aligns sales success with company success.

Cons:

• High risk for employees, leading to turnover if quotas are unrealistic.
• Less financial stability, which may discourage some candidates.
• Can lead to burnout or overly aggressive sales tactics.

Factors to Consider When Structuring Sales Compensation

1. Deal Size and Sales Cycle – If your deals are large and take months to close, a higher base may be necessary to retain talent through longer cycles.
2. Industry Norms – Different industries have different expectations. SaaS startups may use 50/50 splits, while enterprise sales teams lean toward 70/30.
3. Company Growth Stage – Early-stage startups may offer higher variable pay to incentivize aggressive sales growth, while established companies might opt for stability.
4. Talent Attraction and Retention – Compensation structure impacts who you attract and how long they stay. A competitive, well-balanced plan is crucial.

If you’ve read some of my other blogs, this might sound familiar, but—like so many things in compensation—there’s no universal answer to the “right” split between base and variable pay. The best approach depends on your organization’s goals, industry, and sales strategy. Whether you choose a 70/30, 60/40, or 50/50 model, your compensation plan should align with your business objectives and create a clear path for sales success. By thoughtfully structuring pay, you can drive performance while ensuring long-term stability for your sales team.