Pay Mix

What is Pay Mix?

Pay mix refers to the ratio between an employee's fixed base salary and their variable compensation, typically expressed as a percentage split. In a sales organization, a 60/40 pay mix means that 60 percent of total compensation is guaranteed base salary, while the remaining 40 percent comes from commissions or bonuses tied to performance.

For companies, pay mix is one of the most powerful tools for attracting, motivating, and retaining top sales talent. The right pay mix creates a balance between financial security and the incentive to overperform.

Why Does Pay Mix Matter?

Pay mix directly influences how your sales reps behave on a daily basis. A high variable component encourages aggressive selling behavior, while a higher base provides stability but may reduce the hunger to close deals.

Beyond day-to-day motivation, pay mix plays a critical role in recruiting. Top performers don't just compare total compensation—they scrutinize how that compensation is structured. An experienced rep with a proven track record will often prefer a higher variable component because they're confident in their ability to deliver. Conversely, someone earlier in their career typically seeks more security through a higher base salary.

Finally, pay mix affects your labor costs and cash flow. With a higher variable component, you only pay extra when deals actually close. This reduces financial risk during periods of lower sales activity.

How to Calculate Pay Mix

Pay mix is expressed as two numbers that add up to 100. The first number represents the base salary percentage, and the second represents the variable percentage.

Basic Formula

Pay Mix = (Base Salary / Total OTE) : (Variable Compensation / Total OTE)

Calculation Example in USD

Let's say an Account Executive has the following compensation package:

• Annual Base Salary: $85,000
• Variable Compensation at 100% Quota: $65,000
• Total OTE (On-Target Earnings): $150,000

Calculation:

• Base component: $85,000 / $150,000 = 57%
• Variable component: $65,000 / $150,000 = 43%
• Pay mix: 57/43 (often rounded to 60/40)

This means the rep is guaranteed $85,000 per year regardless of sales results and can earn up to an additional $65,000 in commission at full quota attainment.

Example with Accelerators

Many companies offer accelerators that increase the commission rate for overperformance. In this case, actual variable earnings can exceed the planned amount:

• Base salary: $85,000
• Variable at 100% quota: $65,000
• Variable at 120% quota (with 1.5x accelerator): $97,500

At overperformance levels, the effective pay mix shifts to approximately 47/53, rewarding the extra effort with proportionally higher compensation.

Common Pay Mix Models

Pay mix varies significantly depending on industry, role, and company stage. Here are the most common structures in sales organizations:

70/30 – High Base Model

• Best for: SDRs, BDRs, Customer Success Managers
• Characteristics: Greater stability, well-suited for roles with longer sales cycles or limited direct influence on closing deals
• Example: $70,000 base, $30,000 variable = $100,000 OTE

60/40 – Balanced Model

• Best for: Account Executives, Inside Sales Representatives
• Characteristics: The most common model in B2B SaaS and tech. Provides a solid balance between security and motivation
• Example: $90,000 base, $60,000 variable = $150,000 OTE

50/50 – High Variable Model

• Best for: Enterprise Account Executives, senior sales professionals
• Characteristics: Attracts self-driven reps with proven track records. High risk, high reward
• Example: $100,000 base, $100,000 variable = $200,000 OTE

100% Commission (0/100)

• Best for: Independent sales agents, real estate brokers, freelance reps
• Characteristics: No guaranteed base—everything depends on results. Common in real estate and certain B2C sales environments
• Example: Pure commission at 15-25% of deal value

Pros and Cons of Different Pay Mix Models

High Base Component (e.g., 70/30)

Pros:

• Greater financial security for employees
• Easier to recruit less experienced salespeople
• Reduces short-term thinking and aggressive sales tactics
• More predictable compensation budget

Cons:

• Less incentive for extraordinary effort
• Risk of losing top performers to competitors offering higher variable
• Labor costs remain high even during slow sales periods

High Variable Component (e.g., 50/50)

Pros:

• Strong motivation to close deals
• Attracts ambitious reps who are confident in their abilities
• Lower fixed cost burden during downturns
• Clear connection between performance and reward

Cons:

• Can create unhealthy competition and short-term thinking
• Harder to recruit in competitive job markets
• Higher turnover if quotas are unrealistic
• May lead to aggressive sales techniques that damage customer relationships

When Should You Adjust Your Pay Mix?

Several situations warrant a reassessment of your base-to-variable ratio:

1. Changes in Sales Strategy

If you're shifting from transactional sales to enterprise deals with longer sales cycles, you may need to increase the base component to retain reps during extended periods without closed deals.

2. High Employee Turnover

If top performers are leaving, it could indicate a pay mix that doesn't match market expectations. Research what competitors are offering.

3. Recruiting Challenges

If you're struggling to attract candidates, a higher base component can make the position more appealing—especially for candidates coming from stable jobs.

4. Unrealistic Quotas

If fewer than 60-70% of your reps are hitting their targets, you should either adjust the quotas or increase the base component to prevent demotivation.

5. New Product Launches

During early-stage launches with unknown products, setting realistic quotas can be challenging. A temporarily higher base component can protect reps until baseline performance data is established.

Pay Mix and OTE: How They Connect

Pay mix is closely tied to OTE (On-Target Earnings), which represents total expected compensation at 100% quota attainment. OTE is the sum of base salary and variable compensation:

OTE = Base Salary + Variable Compensation at Quota

When you know your target OTE and desired pay mix, you can easily calculate the individual components:

Example:

• Target OTE: $180,000
• Desired pay mix: 55/45

Calculation:

• Base salary: $180,000 × 0.55 = $99,000
• Variable compensation: $180,000 × 0.45 = $81,000

Industry Benchmarks in the US

Pay mix varies across industries. Here's an overview of typical structures:

How to Communicate Pay Mix to Your Team

Transparency around pay mix is essential for building trust and maintaining motivation. Here are some best practices:

1. Explain the rationale: Tell your team why you've chosen this specific split and how it supports company objectives.
2. Provide calculation examples: Give concrete numbers so reps can see what they can expect at different performance levels.
3. Make data accessible: Use a system like Prowi to give salespeople real-time visibility into their earned commissions.
4. Be upfront about changes: If you're adjusting the pay mix, communicate early and explain the reasoning behind the change.

Pay Mix by Sales Role

Different roles typically warrant different pay mixes based on their responsibilities and impact on revenue:

Sales Development Representatives (SDRs)

• Typical Pay Mix: 70/30 to 75/25
• Why: SDRs influence pipeline creation but don't close deals directly. Higher base provides stability while variable rewards meeting generation.

Account Executives (AEs)

• Typical Pay Mix: 60/40 to 50/50
• Why: AEs directly impact revenue by closing deals. A meaningful variable component drives deal velocity and deal size optimization.

Enterprise Account Executives

• Typical Pay Mix: 50/50 to 55/45
• Why: Enterprise deals are high-value but have longer cycles. Experienced reps can handle more variable risk for bigger upside.

Customer Success Managers (CSMs)

• Typical Pay Mix: 80/20 to 70/30
• Why: CSMs focus on retention and expansion. Variable is typically tied to renewal rates, upsells, or NRR metrics.

Sales Managers

• Typical Pay Mix: 70/30 to 60/40
• Why: Managers influence team performance rather than closing deals directly. Variable is often tied to team quota attainment.

Common Pay Mix Mistakes to Avoid

1. Copying Competitors Blindly

What works for a competitor may not work for you. Consider your sales cycle, deal size, and company stage before adopting industry standards.

2. Setting Unrealistic Variable Targets

If the variable component is attractive on paper but nearly impossible to earn, you'll face trust issues and high turnover.

3. Ignoring Role Differences

Applying the same pay mix across all sales roles ignores the fundamental differences in how each role contributes to revenue.

4. Changing Pay Mix Too Frequently

Constant changes create uncertainty and erode trust. If you need to adjust, do it thoughtfully and communicate clearly.

‍