A bonus that follows attainment
The employee has a target bonus, a fixed amount paid at 100% of target. If the target is partly reached, the same share of the bonus is paid. Bonus divided by target gives a single rate, either per krone of revenue or per unit, such as per contract or per licence sold. The difference from a milestone bonus is that every percent counts, not only 100%.
Worked example
The target is DKK 600,000 in the quarter and the target bonus is DKK 30,000. The rate is 30,000 / 600,000 = 5%. If she sells DKK 510,000, attainment is 85% and the bonus is DKK 25,500. Measured on quantity, for example 40 contracts, the rate is DKK 750 per contract, and 34 contracts also pay DKK 25,500.
Combine with other models
A target bonus is the core of many OTE plans: base salary plus a target bonus at 100%. Above target you can keep the same rate, raise it with an accelerator or add a cap, for example at 150%. Work out the split between fixed and variable pay in the OTE calculator and spread the target in the sales quota calculator.
Pitfalls
The whole model rests on the target. Too low and you pay the full bonus for ordinary work; too high and the bonus feels like a pay cut. Do not blend several targets without weights. If you measure both revenue and quantity, give each its own share of the bonus, for example 70% and 30%.
Danish rules
A bonus is pay and must be stated in writing (Danish Employment Contracts Act, section 3, in Danish). If a salaried employee leaves mid-period, a bonus may be covered by section 17 a of the Danish Salaried Employees Act (in Danish) on a proportional share, and that rule cannot be waived to the employee's disadvantage. Use the bonus agreement template and have your lawyer review it.
Is a target bonus commission or a bonus?
It is set as an amount at a target, so it is a bonus. In practice it works like commission with one rate. The difference matters for the agreement and for the rules when someone leaves, see commission vs bonus.
How often should a target bonus be settled?
Quarterly is a good compromise. Monthly targets swing a lot, and annual targets are too far away to steer behaviour. Settle per quarter and pay after approval.
In Prowi
Create the plan, pick the measurement point and period, set the rule, assign it to roles. From there every closed deal in your CRM is priced live, the rep sees it in the app, the manager approves, and finance exports the file. When data changes, the correction follows automatically.