Renewal commission is compensation paid to salespeople or customer success managers for ensuring existing customers renew their contracts. In subscription-based businesses, renewals are often just as important as new sales for company growth.
The model varies significantly between organizations—some pay renewal commission to the original salesperson, others to a dedicated account manager or CSM, and some don't pay commission on renewals at all.
Renewal commission solves several challenges:
Customer focus: When someone has financial incentive to ensure renewals, customer retention gets higher priority.
Proactive effort: Without renewal commission, renewals can be "forgotten" until the customer cancels.
Alignment: Connects individual compensation with company focus on retention.
Renewals are handled automatically or by customer success without commission:
| Type | Commission Rate |
|---|---|
| New sale | 10% |
| Renewal | 2-4% |
Rationale: Renewals require less sales effort than new business.
Same commission rate regardless of whether it's new or renewed business:
| Scenario | Commission Rate |
|---|---|
| Flat renewal (same value) | 2% |
| Renewal with upsell | 6% |
| Renewal with downsell | 0% |
| Element | Value |
|---|---|
| Renewed contract value (ACV) | $45,000 |
| Renewal commission rate | 3% |
| Renewal commission | $1,350 |
| Element | Value |
|---|---|
| Original ACV | $45,000 |
| New ACV after renewal | $60,000 |
| Upsell portion | $15,000 |
| Renewal commission (3% of $45K) | $1,350 |
| Upsell commission (8% of $15K) | $1,200 |
| Total commission | $2,550 |
| Contract Length | Total Value | Rate | Commission |
|---|---|---|---|
| 1-year renewal | $45,000 | 3% | $1,350 |
| 2-year renewal | $90,000 | 4% | $3,600 |
| 3-year renewal | $135,000 | 5% | $6,750 |
The rep who closed the original deal:
Dedicated person for existing customers:
| Recipient | Share |
|---|---|
| Original salesperson | 25% |
| Account Manager | 75% |
| Aspect | Renewal Commission | Residual Commission |
|---|---|---|
| Timing | At renewal | Ongoing/monthly |
| Trigger | Active renewal action | Continued payment |
| Calculation | Percentage of renewed value | Percentage of MRR |
| Effort | Negotiation, contact | Passive (automatic) |
Be explicit about who is responsible for—and earns from—renewals.
Lower rate for renewals than new sales reflects the lower effort.
Higher rate or bonus for renewals with upsell.
Decide whether auto-renewals generate commission or not.
Renewal commission is an important tool for companies that want to prioritize customer retention. By giving the right people incentive to ensure renewals, you can reduce churn and increase customer lifetime value.
Want to automate your renewal commission? Prowi can automatically calculate renewal commission and track who is responsible for each customer. Book a demo to see how we can optimize your commission structure.