"We give our sales reps bonuses." "Our sales reps are on commission." In everyday conversation, we often use these words interchangeably. But commission and bonus are not the same thing - and the difference has a major impact on how your sales reps behave.
Choose wrong, and you risk either overpaying for mediocre performance - or demotivating your best people. Choose right, and you get an incentive system that drives exactly the behavior you want.
In this guide, we'll cover the difference between commission and bonus, when to use each, and how to combine them effectively.
Commission is variable pay calculated as a percentage (or fixed amount) of each sale. The more you sell, the more you earn - directly and linearly.
| Element | Description |
|---|---|
| Trigger | Each individual sale/closed deal |
| Calculation | % of sales value or fixed amount per sale |
| Payout | Typically monthly, upon invoicing or payment |
| Cap | Often no cap (uncapped) |
Example: A sales rep with 10% commission closes a deal for $100,000 = $10,000 in commission. If she closes two deals, she gets $20,000. Simple.
Want to understand commission in depth? Read our complete guide to sales commission.
See the 7 most used commission models here.
A bonus is variable pay that's paid out when a specific goal is reached - typically an overall goal over a period, not per individual sale.
| Element | Description |
|---|---|
| Trigger | Achievement of goal (quota, KPI, performance) |
| Calculation | Fixed amount or % of target upon achievement |
| Payout | Typically quarterly or annually |
| Cap | Often capped |
Example: A sales rep has a quarterly target of $500,000. When she hits the target, she gets $25,000 in bonus. If she only reaches $400,000 (80%), she might get $15,000 - or nothing, depending on the structure.
Here's the core difference:
| Commission | Bonus |
|---|---|
| Payment per sale | Payment per goal |
| Direct link to activity | Link to results over time |
| Typically unlimited upside | Typically limited upside |
| Frequent payout (monthly) | Less frequent payout (quarterly/annual) |
| Individual focus | Can be individual or team |
This difference means everything for how your sales reps behave.
Real-time insight into commission AND bonus
With Prowi, sales reps can track their earnings live - both commission per sale and progress toward bonus targets. This creates motivation and transparency.
Book a demo →1. Direct motivation
The sales rep immediately sees the result of their effort. Each sale = more in their paycheck. That's powerful motivation.
2. Attracts top performers
Sales reps who know they're good love commission. No cap means unlimited earning potential.
3. Self-regulating costs
You only pay commission when there's a sale. No sales = no commission costs.
4. Simple to understand
"10% of everything you sell" is easy to communicate and understand.
1. Can promote short-term thinking
Sales reps may prioritize quick closes over long-term customer relationships.
2. Hard to use for non-sales activities
How do you give commission for updating CRM, coaching colleagues, or improving processes?
3. Income uncertainty
In seasonal industries or with long sales cycles, income can fluctuate wildly.
4. Can create internal competition
If sales reps compete for the same leads, it can hurt team culture.
1. Can drive broader behavior
Bonus can be tied to many KPIs: customer satisfaction, retention, pipeline quality, team goals.
2. Promotes long-term thinking
Quarterly or annual goals give sales reps reason to think further ahead.
3. More predictable for the company
You know what maximum bonus payout is. Easier to budget.
4. Can promote teamwork
Team-based bonuses create incentives for collaboration.
1. Delay between effort and reward
Waiting 3 months for a bonus is less motivating than commission the same month.
2. "Cliff effects"
If bonus is only paid at 100% of target, sales reps at 95% may give up - or at 105% stop selling.
3. Can feel unfair
"I sold $450,000, she sold $500,000, she gets a bonus, I get nothing."
4. Complexity
The more KPIs in the bonus model, the harder to understand and be motivated by.
Commission works best when:
If the sales rep controls the sales process from start to finish, commission makes sense.
Commission works poorly if 12 months pass between closed deals. The sales rep needs to see results continuously.
Commission models attract sales reps who believe in themselves and want unlimited upside.
Products/services where each sale is relatively standalone (not long implementations or complex relationships).
Examples: SaaS sales, real estate agents, insurance, car sales, recruiting.
Bonus works best when:
Customer satisfaction, retention, quality, collaboration - things that are hard to measure per transaction.
Enterprise sales with 6-18 month cycles are better suited to quarterly goals than per-deal commission.
When multiple people contribute to a sale (SDR, AE, SE, CS), team bonuses may be more fair.
In industries where direct commission can create compliance risks (e.g., financial advisory), goal-based bonus is safer.
Examples: Pharma sales, financial advisory, consulting services, enterprise software.
Most modern sales organizations use a combination. Here's why it works:
| Component | Description | Purpose |
|---|---|---|
| Base salary | 50% of OTE | Security, attract talent |
| Commission | 10% of ACV per deal | Direct motivation per sale |
| Quarterly bonus | Extra at 100%+ of quota | Drive quota attainment |
| Accelerator | 15% commission above quota | Reward overperformance |
This combination provides:
Read more about commission accelerators and how they work.
| Component | Description | Purpose |
|---|---|---|
| Base salary | 60% of OTE | Stability in long cycles |
| Commission | 5% of deal value | Motivation per closed deal |
| Quarterly bonus | Pipeline + closed ARR | Reward pipeline work |
| Annual bonus | Retention + customer satisfaction | Long-term customer focus |
Here, bonus supplements commission by rewarding activities (pipeline) and results (retention) that aren't captured by pure deal commission.
Complex models require transparency
The more components in your compensation model, the more important it is that sales reps can follow along. Prowi provides real-time visibility into all components - commission, bonus, accelerators.
See how it works →"We give $100,000 in annual bonus if you hit your target."
The problem: Too long between effort and reward. The sales rep loses motivation along the way.
Solution: Add a commission component that provides ongoing feedback.
"You get 10% of everything you sell. No quota."
The problem: No drive to stretch. Mediocre performance becomes acceptable.
Solution: Add quotas with accelerators above quota.
"You get $50,000 if you hit 100% of quota. Otherwise nothing."
The problem: Sales reps at 90% give up. Sales reps at 105% stop selling (saving for next quarter).
Solution: Tiered bonus that starts at e.g. 80% and continues above 100%.
"Your bonus depends on: sales volume, customer satisfaction, number of meetings, CRM updates, pipeline quality, and team performance."
The problem: The sales rep can't focus. Too complex to understand.
Solution: Maximum 3-4 components. Focus on what matters most.
Whether you use commission, bonus, or both - if the sales rep doesn't know exactly what they've earned and why, they lose motivation.
Solution: Real-time visibility into all variable pay.
Use this decision flow:
For a deeper guide to designing the right model, see how to design a fair and scalable commission model.
Commission vs. bonus isn't a question of what's "best." It's a question of what behavior you want to drive:
The most important thing isn't which model you choose - but that your sales reps understand it, can track their earnings, and feel motivated by it.
Because it's not about administration. It's about motivation.
Ready to design incentives that motivate?
Whether you use commission, bonus, or a combination - Prowi helps you make it transparent. Your sales reps can track their earnings in real-time, and you can see what drives performance.
Book a demo →