The Ultimate Guide to Sales Compensation Best Practices for Mid-Market Companies

Your VP of Sales just closed a record quarter. The CFO is questioning why commission payouts exceeded budget by 40%. Meanwhile, your Head of People is fielding complaints from the Berlin team about why their US counterparts seem to earn more for similar deals.

Sound familiar?

Sales compensation best practices aren't about finding the perfect formula. They're about building a system that drives predictable revenue, keeps your best people motivated, and doesn't create compliance nightmares as you scale across borders. For mid-market companies operating in regulated industries with teams spread across Europe and the US, getting this right is the difference between controlled growth and expensive chaos.

If your company has between 200 and 2,000 employees, this guide will show you how to build sales compensation that actually works. You'll learn to design plans that cross borders smoothly and spot compliance issues before they blow up in your face.

Key Takeaways

• A sales compensation plan is a written pay policy that defines how a sales role earns fixed pay and variable incentives, including performance measures, eligibility rules, and the timing and conditions of payout.
• Mid-market organisations that operate across more than 3 countries typically need a documented commission policy plus role-based plan templates within 90 days of adding the second quota-carrying region to avoid "side-letter sprawl," according to Teamed's global employment operations methodology.
• For mid-market companies, a practical governance standard is to limit each sales role to 1 primary metric and no more than 3 total measures per plan period to reduce disputes and calculation errors.
• The EU Pay Transparency Directive requires transposition by 7 June 2026 and introduces obligations relevant to incentive pay, including pay-structure transparency and the need to justify pay differences using objective, gender-neutral criteria.
• Choose a single global sales compensation philosophy when your company employs sellers in 2 or more countries and wants consistent behaviours, but allow local pay-mix bands to reflect market norms and statutory constraints.

What Effective Sales Compensation Plans Look Like in Mid-Market Companies

A sales compensation plan is a written pay policy that defines how a sales role earns fixed pay and variable incentives, including performance measures, eligibility rules, and the timing and conditions of payout. It's a strategic tool, not just a payroll mechanism.

On-target earnings (OTE) is a compensation benchmark that equals base salary plus the variable incentive a salesperson is expected to earn at 100% quota attainment within a defined plan period. For a mid-market SaaS company, this might look like £80,000 base plus £40,000 variable for a 60/40 split.

The core components of any effective plan include pay mix (the ratio of base to variable), quota setting methodology, accelerators for over-performance, caps (if any), eligibility criteria, payout timing, governance processes, and documentation standards. Every piece of your plan should help you predict revenue and stand up to scrutiny when people start asking tough questions.

What does "good" look like for a company with 200 to 2,000 employees? Simplicity that reps can repeat back to you. Alignment to a clear sales process. Fiscal responsibility that Finance can model. And documentation that Legal can defend.

The failure patterns are predictable. Side deals negotiated by individual managers. Inconsistent offers to similar candidates. Commission calculations living in spreadsheets that only one person understands. Undocumented exceptions that become precedent. Once you're operating quota-carrying roles in both Europe and the US, these informal arrangements become material risks.

Core Sales Compensation Best Practices for Predictable Revenue

For mid-market companies, a practical governance standard is to limit each sales role to 1 primary metric and no more than 3 total measures per plan period to reduce disputes and calculation errors, according to Teamed's operating guidance for multi-country teams. This aligns with industry trends where most plans now include just three core metrics, down from five or six a few years ago.

These proven approaches help you build revenue you can count on year after year. Not quarter-end spikes that create pipeline debt. Not behaviours that optimise for individual payouts at the expense of customer outcomes.

The fundamentals: align to a small set of clear metrics. Avoid formulas that require a spreadsheet to understand. Ensure every rep can explain their plan in two sentences. Document rules in plain language. Maintain consistency across similar roles. Allow local pay differences with clear rationale. Keep quotas stable. Avoid midyear plan changes unless absolutely necessary and well-communicated.

Transparency reduces disputes and supports HR and Finance under European and US pay transparency rulesTransparency reduces disputes and supports HR and Finance under European and US pay transparency rules. Despite this, only 19% of U.S. companies have a pay transparency strategy. When calculation methods are clear, reps trust the system. When they're opaque, every payout becomes a negotiation.

Consider a mid-market company scaling from a single-country team to hubs across Germany, the UK, and one US region. Standardising plans keeps forecasts credible. It also prepares you for EU pay transparency obligations coming into force by June 2026 and existing US state disclosure requirements.

If a rep cannot explain their plan in simple terms, it's too complex.

How to Design a Sales Compensation Strategy That Aligns With Company Goals

Think of sales compensation governance as your control center. It brings teams together to approve plans, handle exceptions, resolve disputes, and track every change with a clear paper trail. Strategy sets the philosophy and guardrails. Plans are role-specific implementations.

The sequence matters. Define company goals first: growth, profitability, market expansion, product mix. Map target segments and sales motions. Define role families and their objectives. Choose focus metrics like new ACV, margin, renewals, or product mix. Set guardrails around pay mix, affordability, and compliance. Draft a review and approval process.

You need everyone at the table working together. Finance owns affordability and modelling. Sales leadership owns behaviours and targets. People/HR owns equity and market data. Legal owns compliance language.

Consider a European-headquartered software firm moving from founder-led sales to a structured organisation across Europe and North America. The strategy conversation forces decisions about pay mix philosophy, quota sizing methodology, and how to handle territory potential differences between London and New York.

A sample strategy statement: "We pay for performance on a few measurable outcomes, keep plans simple and explainable, maintain internal equity, and adapt locally within global guardrails."

Types of Sales Compensation Plans and When to Use Them

A commissionable event is a contract or revenue milestone that triggers commission eligibility, such as "invoice paid," "contract signed," or "customer go-live," as explicitly defined in the plan document. Different roles need different plan structures.

Salary plus commission combines a fixed base with a percentage of revenue or margin per sale. This is the default for most B2B sales roles.

Commission-only ties pay entirely to sales. Higher risk for both employer and rep. Rare in employee relationships and increasingly scrutinised for contractor arrangements.

Salary plus bonus provides a fixed base with periodic bonuses against specific targets. Better suited for roles with less direct revenue attribution.

Team-based or pooled plans share variable pay across a squad for complex, multi-touch sales cycles.

When to use each: Hunters (new business AEs) typically work best on salary plus commission with accelerators for over-performance. Farmers (Account Managers) often suit salary plus bonus tied to renewals and expansion. SDRs and BDRs respond well to salary plus bonus based on meetings set and qualified pipeline. Customer Success roles with influence but not ownership might warrant modest bonuses on retention and health metrics.

SaaS businesses face their own unique challenges. Recurring revenue models, implementation cycles, and land-and-expand motions suggest balanced pay mix and measures beyond bookings. ARR, gross margin, and multi-year deal incentives often matter.

Where your team works changes what they expect. Europe often expects higher fixed pay. Some countries discourage commission-only arrangements. US norms tolerate higher variable mix. A European-headquartered SaaS firm hiring first US AEs typically shifts from heavy fixed to more balanced OTE to match US market expectations.

Best Practices for Sales Incentive Plans and Sales Commission Plans

An accelerator is a higher commission rate or bonus multiplier that applies after a salesperson exceeds a stated attainment threshold, such as 100% of quota, to increase marginal earnings for over-performance. A threshold gates eligibility to earn variable pay. A recoverable draw is an advance on future commissions that is repaid through later earned commissions under documented repayment rules and a defined recovery window.

Quotas should be realistic but stretching, set using market data and historical performance. Align territories to potential. Avoid guesswork that creates perceived unfairness.With mid-market AEs achieving only 40.1% quota attainment on average, align territories to potential. Avoid guesswork that creates perceived unfairness.

Here's a powerful tool to consider: accelerators. They pay your top performers higher rates when they crush their targets. Thresholds create minimum performance gates before variable pay begins. Caps provide budget protection but can demotivate top performers. Draws and guarantees help during ramp periods or new market entry, but need clear end dates.

How you run your plan day-to-day is just as important as how you designed it. Define commissionable events precisely. Specify treatment of discounts, cancellations, refunds, and clawbacks. Document payout timing to preserve line-of-sight between performance and reward.

European field sales with larger territories and longer cycles may use higher base and milestone bonuses. US inside sales may skew to higher variable with monthly accelerators. Guarantee periods, recoverable draws, and clawback rules vary across Europe and the US. Legal input is essential before finalising plan language.

Do keep rules explicit and accessible. Don't move targets midyear or bury exclusions in fine print.

Sales Compensation Design for Mid-Market Companies With 200 to 2,000 Employees

Commission administration tends to become audit-risky when more than 20 quota carriers are managed in spreadsheets without system audit trails, according to Teamed's operational risk assessment framework.

What worked at fifty people will not carry you to five hundred.

The shift from founder-managed, bespoke deals to multiple teams, managers, and cross-border operations exposes every informal arrangement. That email thread agreeing to a special commission rate? It's now precedent. That handshake guarantee? It's now a liability.

Design requirements for this stage include standard job families and role definitions that enable benchmarking and cross-region alignment. Clear approval rights and exception controls. Scheduled plan reviews and communication protocols. Systems support that moves beyond spreadsheets to tools handling audit trails, disputes, and multi-currency calculations.

Keep it smart but simple enough to actually work. Avoid enterprise bloat while ensuring consistency, fairness, and compliance. Maintain a small set of standard plan templates adapted locally rather than bespoke plans for every hire.

European-headquartered firms operating across several EU countries and one or two US states must harmonise role definitions and pay philosophy while meeting local labour and social security norms. Many seek external guidance to stress test before rollout.

Sales Compensation Best Practices for European Companies Hiring in the US

Most mid-market companies review their standard plans once a year. But if you're launching in new territories or selling new products, check in every 6 months. This keeps your incentives pointing in the right direction, according to Teamed's governance playbook.

Copying your home market plan rarely works in the US.

US sales talent often expects a different pay mix with more variable, aggressive OTE ranges, and clearer quota and commission mechanics. European employers must adapt to compete for talent.

Regulatory differences compound the challenge. State-level pay transparency requirements vary. Written commission agreement requirements exist in several states. At-will employment concepts (where either party can terminate the relationship within lawful constraints) should be reflected in plan documentation.

Avoid transplanting European commission-only contractor models. Worker classification is scrutinised in many US states. What works as a contractor arrangement in one jurisdiction may create misclassification exposure in another.

Here's the trick: stick to the same core principles and metrics everywhere you operate. Adjust pay mix and OTE bands to US norms. Maintain similar governance. Involve US-based HR, Finance, and Legal early. Consider an independent global employment advisor to reconcile EU and US requirements before finalising plans.

How to Adapt Sales Compensation Plans Across Europe and the US

When your sales team deals in multiple currencies, pick one exchange rate and stick with it. Use something reliable like the month-end ECB rate for all quota and payout conversions during each plan period. Teamed recommends this approach for companies based in Europe or the UK.

Begin by nailing down your global approach. Decide where you stand on paying for performance, keeping things fair internally, and staying competitive in the market. Document it clearly. Share it with every hiring manager.

Local adaptation levers include pay mix and OTE ranges using local market data, currency handling for quotas and payouts, benefits and statutory elements like statutory bonuses or collective agreements, and transparency practices aligned to EU and US rules.

Multi-currency mechanics create friction. Decide whether quotas are set in local currency or a reference currency. Define FX rates for conversions. Explain differences as cost-of-labour and market norms, not preference.

The EU Pay Transparency Directive (Directive (EU) 2023/970) was adopted in 2023 and requires EU Member States to transpose its provisions into national law by 7 June 2026, affecting how employers justify and communicate pay structures, including variable pay components. US state requirements vary but trend toward more disclosure.Currently, only 16% of organizations are ready to meet these requirements using base pay alone, with readiness dropping to just 3% when considering total cash compensation. US state requirements vary but trend toward more disclosure.

How you explain things makes all the difference. Keep managers and reps informed. Use simple visuals or examples showing how similar roles in London versus New York fit under the same framework. Avoid resentment while staying compliant.

Compliance and Employment Model Risks in Global Sales Compensation

A clawback lets you take back commission you've already paid out. You can use it when customers don't pay, cancel their orders, demand refunds, or when reps break company rules. Just make sure it's legal where you operate.

Sales roles are often tightly managed and integral to operations. This triggers employee status tests in many jurisdictions. The differences between US and European tests matter, but the direction is consistent: if you treat someone like an employee, they probably are one.

How you hire people affects your risk exposure. Direct employment via local entity provides highest control, full compliance obligations, and strongest stability. Employer of Record (EOR) enables compliant employment without an entity, though country-specific constraints apply. Independent contractors offer most flexibility but highest misclassification risk if treated like employees.

Don't copy employee commission plans to contractors without legal adjustment. Commission-only contractor models are riskier in strict jurisdictions and regulated industries. In financial services, healthcare, and defence, incentive structures face additional scrutiny around mis-selling and conflicts of interest.

UK companies classed as "medium or large" for off-payroll working rules must operate IR35 determinations for contractors, and HMRC can assess unpaid tax and NIC liabilities going back up to 6 years in many cases, increasing the compliance exposure of commission-paid contractor sales roles.

Watch out for these red flags: fuzzy lines between contractors and employees, commission terms that aren't written down, changing plans after the fact, skipping local legal reviews, treating people differently in different countries, and missing documentation trails.

If you work in a regulated industry, never pay commission based on volume alone. Always include quality checks or compliance requirements. This protects you from mis-selling claims, according to Teamed's compliance-first incentive design guidance.

How Mid-Market Companies Should Govern and Review Sales Compensation Design

Mid-market organisations that operate across more than 3 countries typically need a documented commission policy plus role-based plan templates within 90 days of adding the second quota-carrying region to avoid "side-letter sprawl," according to Teamed's global employment operations methodology.

Governance means decision rights, review cadence, documentation standards, and dispute escalation. Without it, every exception becomes precedent.

Practical structure: a cross-functional compensation committee including Sales, Finance, People/HR, and Legal. A clear approval matrix for new plans, exceptions, and off-cycle changes. Keep all your plan versions in one place where everyone can find the right one.

Check in once a year to make sure your plans still match your performance goals and strategy. Deeper reviews for new markets, new products, or employment model shifts.

Document everything. No exceptions. Plan documents, signed acknowledgements, change logs, rationale for decisions. All essential for audits and pay transparency evidence.

Review criteria: can reps explain the plan? Are desired behaviours showing up? Is the plan market-competitive? Are inequities emerging across countries or demographics? Are disputes rising? Are quotas realistic?

Multi-country control prevents local side deals and maintains global consistency. Consider periodic independent reviews for objectivity.

Your sales comp plans deserve the same careful handling as any major company policy.

How Teamed Guides Mid-Market Leaders on Global Sales Compensation Best Practices

Teamed helps companies navigate global employment and compliance. We're advisors, not software sellers. We work with mid-market companies to build sales compensation that makes sense and holds up no matter where you do business.

We'll help you figure out the best way to hire in each country, whether that's contractors, EOR, or setting up local entities. We'll also explain what each choice means for compensation and risk. We advise on EU and US pay transparency, equal pay, and labour rules as they relate to incentives, including practical plan language. We help you evaluate plan affordability, equity, and compliance across Europe and the US, including documentation and governance standards. We support regulated-industry incentive design in financial services, healthcare, and defence to avoid mis-selling risk and regulator scrutiny.

If you're a European mid-market company expanding to the US or beyond, we've got you covered. Whether you're juggling contractors, EOR arrangements, and local entities across multiple countries, Teamed can advise you in over 180 countries.

If you're planning to move salespeople from contractor to EOR to entity, or expand into new regulated markets, talk to the experts about the employment and compliance implications before you commit.

Frequently Asked Questions About Sales Compensation Best Practices

How should we use guarantees, draws, and signing bonuses in a sales compensation plan?

Guarantees are temporary minimum payments during ramp. Draws are advances against future commissions that are repaid through later earned commissions under documented repayment rules and a recovery window. Signing bonuses are one-time joiner payments. Use sparingly for ramp or new markets with clear amounts, timelines, and recovery rules. Avoid creating permanent expectations.

How do clawbacks and chargebacks work in sales commission plans?

Clawbacks and chargebacks reverse paid or earned commissions due to cancellations, refunds, or non-payment. Specify triggers, time windows, and calculation methods in the plan and contracts. Validate legality in each country before enforcement.

What tools do mid-market companies need to manage sales compensation at scale?

Once you're managing teams across multiple countries, it's time for proper software. Look for sales compensation tools or HR/Finance systems that handle multiple currencies, track everything, manage disputes, and give your team clear statements.

How should we adjust a salesperson's compensation if they relocate to another country mid-year?

Handle it like any major business change. Reassess base, quotas, and variable mechanics using local market data and legal/tax rules. Document via a written addendum with effective date and any pro-ration.

When should a company bring in external advisors to review sales compensation design?

Call in the experts when you're expanding to new countries, switching how you hire, working in regulated industries, or seeing more disputes and exceptions than usual. Independent reviews surface compliance risks and misaligned incentives.

What is mid-market?

Typically 200 to 2,000 employees or £10m to £1bn revenue. Cross-border complexity increases but in-house global employment expertise may still be lean.

How often should we run an external audit of our global sales compensation plans?

Bring in outside experts to review everything every 12 to 24 months. Don't wait if you're adding new countries, changing how you hire, or if regulators and auditors come knocking.or