As a sales rep, you have to reconcile the fact that you’re trying to make as much money as possible with the fact that you can only make a finite amount of sales in a given quarter. The sky isn’t the limit — but however far the best of your abilities can take you is.
But sometimes, the money your company allows you to make stops short of your full potential. Some businesses impose a cap on commission — a strict limit on what you’re allowed to earn. Generally, that’s not the way to go.
Here, we’ll learn about the benefits of uncapped commission, insights into why some companies might not be interested in it, and the pitfalls of including the term in job listings.
- What is uncapped commission?
- Why would a company want to cap commission?
- Uncapped Commission Pros and Cons
- Why You Should Avoid “Uncapped Commission” in Job Descriptions
What is uncapped commission?
Uncapped commission is a sales compensation strategy where a salesperson can earn as much commission as possible over a specific period.
A cap on commission might mean a cap on effort. That’s why uncapped commission can be a powerful incentive for sales reps to exceed expectations. If a sales rep’s commission is capped at $50,000 for $500,000 worth of sales in a quarter, what incentive do they have to try to go beyond that?
Many salespeople won’t be receptive to a pat on the back, and a trophy that doesn’t come with some sort of tangible incentive might not be enough to set your highest-performing reps on the right track. A financial reward is often the most powerful motivator for reps — and leaving commission uncapped can provide just that.
In many cases, uncapped commission is a given. Many — if not most — companies don’t put a lid on how much an exceptional rep can earn for going above and beyond. Businesses should want the most out of their reps, and you won’t get that by imposing hardline restrictions on compensation.
Capped vs. Uncapped Commission
The difference between these two sales commission strategies lies in the degree of monetary incentives available to sales reps. A capped commission strategy restricts the total commission a salesperson can make over a predefined time frame (such as a month, quarter, or year), even if they bring in the big bucks.
On the other hand, uncapped commission gives sales reps the opportunity to make as much money through commissions as they can. The only constraint is their own performance. This encourages sales reps to be proactive and take the initiative to do well.
However, choosing between capped or uncapped commission is just one piece of the puzzle. Let’s zoom out and take a look at the multiple ways organizations design sales compensation and commission plans in this graphic.
A base salary paired with an uncapped commission is usually a good way to go to drive your sales reps to perform well. Watch this video for some things to consider when devising your sales compensation plan:
You can also take a more in-depth look into sales commissions and how to structure them.
Why would a company want to cap commission?
It wants to avoid overpaying its reps.
That’s probably the bluntest, most obvious answer to that question. Companies often want to look out for what they believe to be their most immediate financial interests. In many cases, they want to be able to present definitive budgets and save money. But that strategy often backfires.
A sales rep who closes a massive deal only to find out they’re going to receive a fraction of the commission it warrants is going to be disappointed. They will be less interested in making the necessary effort to bring in as much business as they can.
That loss of initiative often means less revenue and lowered morale within a sales org, so it’s fair to say that capping commission is often counterintuitive and unproductive.
Let’s now take a closer look at both the benefits and drawbacks of uncapped commissions.
Uncapped Commission Pros and Cons
Pros for the Company
Uncapped commission can lead to more sales and, thus, more money coming in.
Knowing that better results mean more cash in their pockets fuels sales reps to push themselves to their maximum potential. This also works great to boost the organization’s bottom line.
Uncapped commission fosters a positive internal sales environment.
Uncapped commission helps boost morale and productivity as sales reps have some level of control over their success and earnings. There’s a tangible reward for going the extra mile, which can inspire reps to surpass their previous results and manage their pipeline effectively to nurture more sales.
HubSpot’s 2023 Sales Strategy & Trends Report reveals that a fair compensation structure and a motivating incentive structure are crucial elements of an internal sales culture for salespeople to succeed. Uncapped commission is a way to partially accomplish this.
After all, happy employees lead to a healthy company.
Pros for the Sales Reps
Uncapped commission allows them to grow income exponentially.
An uncapped commission structure offers sales reps the chance to make as much money as they can. Earning capacity is directly tied to performance, giving them the ability to meet and exceed their personal financial goals much more quickly.
Reps feel that the company is invested in their success.
An uncapped commission structure assures sales reps that their work is valued and efforts acknowledged. They’re not just another cog in the machine but play an integral role in organizational growth.
Companies are unable to predetermine commission amounts to be paid.
An uncapped commission structure means that companies cannot accurately estimate in advance how much they’ll have to pay in commissions on a monthly, quarterly, or annual basis.
Uncapped commission can cause sales reps to focus on making immediate sales over long-term success and customer fit.
An uncapped commission structure that solely prioritizes more sales might lead to salespeople resorting to pushy tactics to gain more clientele (and more commissions), neglecting customer fit and customer success in the process. This can result in accelerated churn.
An effective way to solve this is to incentivize metrics that contribute to sustained growth, along with getting customers to sign on the dotted line. Over 85% of business buyers expect sales representatives to act as trusted advisors, so it’s important to cultivate and reward this behavior.
Why You Should Avoid "Uncapped Commission" in Job Descriptions
Job seekers should be wary of any job description that touts uncapped commission as a major selling point. In many cases, that could be a big-time red flag. Uncapped commission is often an implied benefit for most sales positions — it’s almost always a given.
Advertising uncapped commission is like bragging about providing salespeople with a company computer and an office with Wifi access. Sure, it’s important to have, and a sales role would be tougher without it, but it doesn’t look particularly impressive to prospective candidates.
For businesses in the hiring process, putting “uncapped commission” on your job listing can make you look cheap and spammy. It might lead candidates to believe they’ll be underpaid — that you’re unwilling to state what a sales rep at your company can actually expect to earn.
Instead, your job descriptions should be straightforward and honest.
Detail factors like the types of insurance your company can provide, the amount of PTO candidates can expect, other financial incentives like tuition reimbursements and commuter benefits, and any other meaningful incentives you feel your potential hires should know about.
As far as mentioning compensation, be frank with candidates.
Give them a picture of the pay structure you offer, like “base plus commission.” And consider giving them a picture of their on-target earnings — the average amount they can expect to earn from their base salary coupled with a realistic figure of their potential commission.
The Truth About Uncapped Commission
Capping commission can mean putting a lid on sales reps’ efforts. In most cases, salespeople will be less inclined to pursue that extra deal or push themselves that much further if they know they won’t be appropriately paid for it.
If you’re a sales leader keen on getting the most out of your reps, leaving commission uncapped is in your best interest.
Uncapped commission generally means uncapped effort. If you want that kind of commitment from your team, don’t restrict that element of their compensation.