Short answer: A renewal commission plan rewards how much of the ARR up for renewal customers actually renew. That is called GRR (gross revenue retention). In this example the quarterly bonus is DKK 37,500 at 90% GRR. Each percentage point above or below target moves the bonus by 6 percentage points, so 85% GRR pays 70% of the bonus and 95% pays 130%. Below 80% nothing is paid.
The example is illustrative, not a benchmark: the numbers show how the plan calculates, not what an account manager should earn. Amounts are in Danish kroner (DKK) before pension. It is one of ten examples in commission plans by role.
Who is this plan for?
- Account managers or renewal managers whose main job is renewing existing contracts.
- Companies with annual or multi-year contracts, where renewals fall on known dates.
- Teams where expansion sits with another role, so renewals and expansion are not mixed.
If the AM also owns expansion, the NRR-based plan is a better fit.
The plan at a glance
| Element | Example |
|---|---|
| Base salary | DKK 37,500 a month (DKK 112,500 a quarter) |
| Variable pay at 100% | DKK 37,500 a quarter |
| OTE | DKK 600,000 a year |
| Pay mix | 75/25 |
| Metric | GRR on contracts up for renewal in the quarter. Example: DKK 2,000,000 ARR up for renewal, target 90% |
| Rate | Bonus = target bonus x share. Share = 100% + 6 percentage points per GRR point above or below target |
| Accelerator and threshold | Below 80% GRR: zero. At 80%: 40% (DKK 15,000). Cap: 160% at 100% GRR |
| Payout | Quarterly, with the salary for the month after quarter end |
| Clawback | None. A renewed customer who cancels later counts in the period of the next renewal |
GRR = renewed ARR excluding expansion / ARR up for renewal. Expansion does not count, so GRR can be at most 100%. Downgrades reduce GRR just as cancellations do. See also churn rate.
Worked example: 70, 100 and 130% of target bonus
| GRR in the quarter | 85% | 90% | 95% |
|---|---|---|---|
| ARR up for renewal | DKK 2,000,000 | DKK 2,000,000 | DKK 2,000,000 |
| Renewed ARR | DKK 1,700,000 | DKK 1,800,000 | DKK 1,900,000 |
| Lost or downgraded ARR | DKK 300,000 | DKK 200,000 | DKK 100,000 |
| Share of target bonus | 70% | 100% | 130% |
| Bonus | DKK 26,250 | DKK 37,500 | DKK 48,750 |
| Base salary for the quarter | DKK 112,500 | DKK 112,500 | DKK 112,500 |
| Pay for the quarter | DKK 138,750 | DKK 150,000 | DKK 161,250 |
At 85%, GRR is 5 points below target, so the share is 100% - 5 x 6 = 70%, and the bonus is 70% of DKK 37,500 = DKK 26,250. At 95%, the share is 100% + 5 x 6 = 130%. The gap between a good and a bad quarter is DKK 22,500 in bonus and DKK 200,000 more lost ARR in the bad quarter.
Pitfalls
- Losses the AM cannot influence. Bankruptcies, acquisitions and a customer closing a department can drag GRR down. Decide in advance whether they are excluded, and who decides.
- Discounts to renew. A renewal at a lower price is a downgrade and reduces GRR. That is correct, but write it down so the AM does not assume every renewal counts in full.
- Small quarters. With few renewals in a quarter, a single customer can move GRR by many points. Consider measuring on a rolling six or twelve months.
- Renewals that slip. If a renewal moves into the next quarter, the plan must say where it counts.
- No reward for longer commitment. If you want more multi-year renewals, add a small kicker, for example a fixed amount per renewal with a 24-month commitment.
Danish rules to know
Short and general, not legal advice. Check your collective agreement and employment contract, and ask your lawyer or employers' association if in doubt.
- Holiday pay on commission: The employee is entitled to compensation for commission lost because of holiday (Danish Holiday Act, ferieloven, sections 17 and 19). Renewals are often negotiated over several months, so the holiday loss is less obvious than in new business. Describe the method anyway. See holiday pay on commission.
- Sickness and parental leave: For salaried employees paid commission, pay during sickness and maternity leave must include the commission they would presumably have earned (Salaried Employees Act, funktionærloven, section 9(3)). For longer absence a colleague may take over the renewals. Write down who gets the bonus. See commission during sick leave.
- Bonus when someone leaves: A salaried employee who leaves during the financial year is entitled to a proportional share of profit shares, gratuities and similar payments (funktionærloven section 17 a). The quarterly bonus may be covered. If the AM leaves during the quarter, describe how the proportional share is calculated. See commission after resignation.
- Changing the plan: A material change, such as a lower rate or a higher threshold, must be notified with the employee's individual notice period. New targets that the agreement expects to be set each period do not, as a rule, require notice. Put the change rules in your commission agreement.
How to put the plan in writing
Use the bonus agreement template for the bonus itself and the commission plan template if you combine it with commission. Write down at least:
- Which contracts are up for renewal in the quarter, and how the list is locked at the start of the quarter.
- How GRR is calculated, and that expansion does not count.
- The bonus scale, the floor and the cap.
- Which losses, if any, are excluded.
Try the numbers
See what churn and corrections do to the payout in the clawback and corrections calculator, and test pay mix in the OTE calculator.
Related plans
- All ten commission plans by role
- NRR-based account manager plan
- Customer success bonus plan
- Multi-year deal commission plan
Terms and models used in this plan: retention-based commission, renewal commission, churn rate, NRR, performance bonus, milestone bonus.
How Prowi helps
Prowi calculates the plan live from your CRM data, reps follow their earnings in the app, and once the period is approved the amount goes on to payroll. Book a demo to see your own plan calculated.
FAQ
What is GRR?
Gross revenue retention: the share of ARR customers keep after cancellations and downgrades, but before expansion. GRR can be at most 100%.
What is the difference between GRR and NRR?
NRR includes expansion, GRR does not. A GRR plan rewards retention only. See the NRR-based plan for a plan that also rewards expansion.
Should renewals pay commission or a bonus?
Both are used. Commission per renewed contract is simple but also pays for renewals that would have happened anyway. A GRR bonus pays for the result across the whole book. Read more about renewal commission.
Sources
- Danish Salaried Employees Act (funktionærloven), consolidated act no. 1002 of 24/08/2017, sections 9 and 17 a. retsinformation.dk
- Danish Holiday Act (ferieloven), consolidated act no. 152 of 20/02/2024, sections 17 and 19. retsinformation.dk
This article is general information, not legal advice. The worked examples are illustrative.