Rolling out a new commission plan: the short answer
Start about 8 weeks before the plan takes effect. Get sign-off from management and finance, test the plan on last year's numbers for every rep, hold a 1:1 with each rep using their own figures, put the plan in writing and get it signed. Then review the first statement together. If the plan lowers a rep's expected pay, Danish law may treat it as a material change that needs the rep's individual notice period, which can be longer than 8 weeks.
This guide is for sales leaders, CFOs and HR at Nordic companies introducing a new plan for the coming year. It covers a timeline, who signs off on what, a worked example comparing the old and new plan for each rep, an agenda for the 1:1 and the mistakes we see most often. Where the rules matter, we use Danish employment law, because most of our readers employ salespeople in Denmark. If your team sits in another country, the process still works, but check the local rules.
Timeline: from 8 weeks out to the first month
Planning season is usually Q4, and many plans start on 1 January. The timeline counts back from the start date. It works when no rep ends up worse off. If someone does, start earlier for them (see the section on Danish rules).
| When | Task | Owner |
|---|---|---|
| 8 weeks before | Write down the goal, draft the plan, pull last year's sales data per rep | Sales leader |
| 7 weeks before | Test the draft on last year's numbers for each rep | Finance and sales leader |
| 6 weeks before | Check whether the plan is a material change for anyone and work out notice periods | HR, lawyer if needed |
| 5 weeks before | Approve the plan and budget | CEO and CFO |
| 4 weeks before | Written plan, agreement addendum and answers to obvious questions ready | HR and sales leader |
| 3 weeks before | Team kick-off, then 1:1s | Sales leader |
| 2 weeks before | Addenda signed by a fixed deadline | HR |
| 1 week before | Plan set up and tested in payroll and the commission calculation | Finance |
| Start date | Plan takes effect | Everyone |
| After the first period | First statement reviewed with each rep | Sales leader and finance |
Who needs to sign off?
A commission plan is a pay agreement, a budget and a management tool at the same time. Several functions need to approve it before reps see it.
| Function | Approves | Must be able to answer |
|---|---|---|
| CEO / management | Goal and overall budget | Does the plan reward the behaviour the strategy needs? |
| Finance / CFO | Budget and cost | What does the plan cost at low, normal and high attainment, and how is it accounted for? |
| HR | Agreement wording and notice | Is this a material change for anyone, and what do contracts and collective agreements say? |
| Sales leader | Targets, rates and communication | Are targets realistic, and can every rep explain the plan back? |
| Payroll | Payment | When is commission paid, and how does it feed into holiday pay and absence? |
Record each approval with a date and plan version. Later you can show which version applied to any payout.
Test the plan on last year's data
The most useful exercise is a shadow calculation: run the new plan on each rep's actual sales for the last 12 months and compare with what they earned under the old plan. Finance sees what the plan costs, and you see who gains and who loses.
Example: A company wants to move from a flat 7% of revenue to 6% up to an annual target of DKK 2,000,000 and 12% on revenue above target. The goal is to pay more to reps who hit target. Here is last year under both plans:
| Rep | Revenue last year | Attainment | Old plan (7%) | New plan (6% / 12%) | Difference |
|---|---|---|---|---|---|
| A | DKK 1,600,000 | 80% | DKK 112,000 | DKK 96,000 | -DKK 16,000 (-14.3%) |
| B | DKK 2,000,000 | 100% | DKK 140,000 | DKK 120,000 | -DKK 20,000 (-14.3%) |
| C | DKK 2,600,000 | 130% | DKK 182,000 | DKK 192,000 | +DKK 10,000 (+5.5%) |
| D | DKK 3,200,000 | 160% | DKK 224,000 | DKK 264,000 | +DKK 40,000 (+17.9%) |
| Total | DKK 9,400,000 | DKK 658,000 | DKK 672,000 | +DKK 14,000 (+2.1%) |
How the numbers work: rep C gets 6% of DKK 2,000,000 = DKK 120,000 plus 12% of DKK 600,000 = DKK 72,000, a total of DKK 192,000. Under the old plan C got 7% of DKK 2,600,000 = DKK 182,000.
Three things stand out:
- Cost goes up slightly: with the same sales as last year, the plan costs DKK 14,000 more. Finance needs to know before approving it.
- Break-even is 120% of target: at DKK 2,400,000 both plans pay DKK 168,000. Below that, reps earn less than before; above it, more.
- A and B are worse off: on the same sales they lose DKK 16,000 and DKK 20,000. Under Danish law, that can make the plan a material change for them, with individual notice.
The shadow calculation is also the material for each 1:1. To try your own rates first, use our free calculators.
Danish rules when the plan changes pay
Commission is pay. A new plan that lowers a rep's expected earnings can therefore be a material change to their terms of employment. The main Danish rules in brief:
- Notice: a material change must be notified with the employee's individual notice period. For salaried employees this follows from section 2 of the Danish Salaried Employees Act (funktionærloven) and is between one and six months depending on length of service, unless the contract gives more.
- Individual and in writing: notice must be given specifically to each rep. A team email is not enough.
- A fair reason: the change must be justified, for example by a new strategy. The goal you wrote down 8 weeks out is a good start.
- Written notification: changes to pay must be notified in writing no later than the day they take effect (section 5 of the Danish Employment Contracts Act, ansættelsesbevisloven).
- Annual targets: new targets are generally not a material change if the agreement assumes targets are set each year and the new ones are in line with earlier ones.
In the example, A and B may be entitled to several months' notice. You can start the plan later for them or give them a transition period where they get the higher of the old and new calculation. The commission agreement template covers how to write change rules into the agreement. This is general information about Danish law. Check with your lawyer or employers' organisation before you give notice.
The 1:1 with each rep
The team kick-off explains why. The 1:1 explains what the plan means for this person. Book 30 minutes and use this agenda:
- The goal: what should the plan reward, and why is the old plan not good enough?
- What changes: rates, targets, accelerator, clawback and payment timing.
- The rep's own numbers: last year under the old and new plan.
- The path forward: what does it take to earn the same or more?
- The transition: which plan applies to deals in progress on the start date?
- Questions and deadline: when must the rep reply, and who can they ask?
Don't email the plan before the meeting. A rep should hear the reasoning from their manager, not discover a pay cut in an attachment. Write down the questions. If the same question comes up three times, the answer belongs in the plan.
A written plan and agreement
The new plan has to be in writing so the rep, the manager and payroll read it the same way. Most companies use three layers:
- Commission plan: rates, targets and periods for a role for a year. Start with our commission plan template.
- Commission agreement: the individual rep's terms, signed. See the commission agreement template.
- Commission policy: shared rules on when commission is earned, clawbacks, leaving and disputes. See commission policy in the glossary.
At a minimum the plan should state the start date, the basis, when a deal counts as earned, rates and targets, any accelerator and cap, clawback, payment timing, the rule for deals in the pipeline and a worked example. If you have several roles, see our commission plans by role with ten examples.
Sign-off by the rep
Ask each rep to sign an addendum to their commission agreement by a clear deadline. It documents that they received and understood the plan. If a rep does not sign and the change is material for them, the notice rules apply: under Danish law the rep can treat it as a dismissal when the notice period runs out. Keep signed addenda, plan versions and notice letters together so you can always show which rules applied.
The first month: follow-up
Most errors in a new plan show up in the first statement. Set time aside to:
- go through the first statement with each rep and check it against the plan
- fix errors quickly and explain the correction in writing
- collect questions and add the answers to the plan
- watch for unwanted behaviour, such as deals pushed into the next period to hit the accelerator
Unclear points left alone turn into disputes. Read more in our guide to avoiding commission disputes.
Common mistakes when rolling out a new plan
- The plan is shown to the team before finance has approved the cost.
- No shadow calculation, so nobody knows who is worse off.
- The same start date for everyone, even though some reps need several months' notice.
- The plan is sent by email with no conversation.
- No rule for deals in progress when the plan changes.
- The plan exists only as slides, not as a signed agreement.
- Payroll and the commission calculation are not updated on the start date.
When the new plan starts at year-end
If the plan starts on 1 January, the rollout overlaps with closing the year on the old plan: annual true-ups, open clawbacks and December deals. Our year-end commission checklist covers that part.
Prowi and new commission plans
Prowi calculates commission live from CRM data according to the plan's rules. When a period starts, each rep gets a statement that updates throughout the period. When the period closes, it moves to awaiting approval, and approved amounts go on to payroll. Corrections and clawbacks are handled in Prowi, which makes the first month on a new plan easier to follow. Book a demo if you are about to roll out a new plan.
FAQ
How far in advance should you announce a new commission plan?
Allow about 8 weeks from draft to start when nobody is worse off. If the plan lowers someone's expected pay, in Denmark they need their individual notice period, which for salaried employees is between one and six months.
How do you communicate a new commission plan to the sales team?
Start with a short team session on the goal, then hold a 1:1 with each rep showing last year's numbers under both the old and the new plan. Hand over the written plan after the meeting, not before.
Do reps have to agree to a new commission plan?
Each rep should sign the plan or an addendum to their commission agreement. In Denmark, if the change is material and the rep does not accept it, they can treat it as a dismissal when the notice period runs out.
What is a shadow calculation?
A calculation of what each rep would have earned under the new plan with last year's actual sales. It shows the cost and who would be worse off.
What happens to deals in the pipeline when the plan changes?
Decide a rule and write it into the plan, for example that the plan in force on the day a deal is earned applies. What matters most is that the rule is known before the plan starts.
Sources
- Danish Salaried Employees Act (funktionærloven), LBK no. 1002 of 24/08/2017 (retsinformation.dk, in Danish), section 2
- Danish Employment Contracts Act, act no. 501 of 16/05/2023 (retsinformation.dk, in Danish), section 5
- Dansk Erhverv: Changing and renewing commission and bonus schemes (in Danish)
This article is general information, not legal advice. Check your collective agreement and employment contracts, and ask your lawyer before giving notice of a change.