Uncapped commission is a term that’s often used to entice salespeople to join a company or to motivate them to sell more. But what does it really mean? Are any sales compensation plans really uncapped? The short answer is yes and no.

On one hand, there are sales compensation plans that truly have no caps on how much commission a salesperson can earn. These plans are often used in industries where salespeople are expected to bring in large deals or where the sales cycle is long. In industries where gross margins are high (think software, especially SaaS), uncapped plans are the norm. However in lower-margin industries like retail, telecom, energy or real estate, caps are more common because more revenue does not always mean more profit for the company.

On the other hand, even if a sales compensation plan has a cap in place, there are often ways for salespeople to earn more than the cap. For example, some plans may offer bonuses for hitting certain milestones or for exceeding a certain quota. Others may offer accelerators, which means that once a salesperson hits a certain threshold, their commission rate increases. So, while a sales compensation plan may technically have a cap in place, there are often ways for salespeople to earn more than the cap if they perform well.

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What is Uncapped Commission?

In short, uncapped commission is a type of sales compensation plan where there is no limit to the amount of commission a salesperson can earn. The more you sell, the more you earn.

Defining “Uncapped”

To understand uncapped commission, it’s important to understand what “capped” commission is. Capped commission plans put a limit on the amount of commission a salesperson can earn, regardless of how much they sell. This can be demotivating for salespeople, as they may feel that their efforts are not being fully rewarded.

On the other hand, uncapped commission plans offer salespeople the potential to earn as much commission as they can, without any limit. This can be a powerful incentive for salespeople to work harder and sell more, as they know that their efforts will be directly rewarded.

Types of Compensation Plans

There are several types of sales compensation plans, and uncapped commission is just one of them. Other types of compensation plans include, but aren’t limited to:

• Base rate only: A fixed amount of money paid to the salesperson, regardless of how much they sell.
• Commission-only: Salespeople earn a percentage of the revenue they generate, but there is no base salary.
• Base plus commission: Salespeople receive a base salary plus a percentage of the revenue they generate.
• Draw against commission: Salespeople receive a “draw” or advance on their commission, which is then deducted from their future earnings.

Each type of compensation plan has its own advantages and disadvantages, and it’s up to the company to decide which plan is best for their sales team. Uncapped commission can be a powerful motivator for salespeople, but it may not be suitable for every company or sales team.

Learn more about different commission structures here.

The Reality of “Uncapped” Commissions

The idea of unlimited earning potential is certainly appealing, but is it really possible? Let’s take a closer look at the reality of “uncapped” commissions and what you need to know before signing on to a sales job that promises unlimited earning potential.

Typical Limitations

First, it’s important to understand that even if a company offers “uncapped” commissions, there are often limitations and conditions that apply. 

For example, some companies may cap commissions once a certain amount has been earned, or may only offer uncapped commissions for a limited time period. Additionally, some sales positions may have quotas or other performance metrics that must be met in order to qualify for uncapped commissions. 

Another common limitation is for commissions to be paid only on the original sale. Often, a salesperson should not expect to get paid commission on a follow-up sale to the same customer if they aren’t the one responsible for that sale.

Company Policies and Caps

While some companies may truly offer uncapped commissions, others may have policies in place that limit or cap earnings — even if they say commissions are “uncapped.” 

A company may cap commissions at a certain percentage of the sale price, or may only pay commissions on certain products or services. It is also common for any discounts to offset commissions. This is to counter the salesperson’s incentive to drop the price in order to close a sale if it might be unprofitable for the company. It’s important to carefully review the company’s policies and compensation plan to understand exactly what you’re signing up for.

Before accepting a sales job that promises unlimited earning potential, be sure to carefully review the company’s policies and compensation plan to ensure that you fully understand what you’re signing up for.

Other Limitations Can Act as Informal Caps

There are many industries, like SaaS sales, where uncapped commission is the norm.

In a SaaS model, the gross margins on any sale are usually relatively high (60%+), which means that the company can afford to pay out commission for every dollar sold against and above quota — often with significant accelerators once a seller exceeds quota. This is usually uncapped, and it is very common for the top seller to be the highest paid person in the company. (Some top sellers can make more than the CEO!)

However, for most sellers, there may be other factors that make it difficult or impossible for them to take home this much commission — even if they’re on the exact same comp plan.

The most common factor that can effectively limit commissions is which customers that a particular seller can sell to. At some companies, prospect accounts are split up by geography or industry, and at others each seller has a named list. Many factors, such as seniority, or historical performance versus quota, can also factor into who gets inbound leads. 

These factors can have a huge effect on the amount of commission that a seller can actually take home. And while these are not typically thought of as “caps,” per se, they can still have the effect of capping a seller’s earning potential.

Benefits of Uncapped Plans

Motivation and Performance

Uncapped plans motivate salespeople to perform better. This is because you know that your earning potential is not limited by a fixed salary or commission cap. You’re more likely to work harder and sell more to earn more. 

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 you the ability to meet and exceed their personal financial goals much more quickly. This can lead to higher levels of motivation, effort, and ultimately, sales outcomes.

Earning potential limited in your current role? Find a new one here.

Attracting Top Talent

Uncapped plans can attract top sales talent. Top salespeople are often motivated by the potential for unlimited earnings. They are more likely to be attracted to companies that offer uncapped plans because they know that their earning potential is not limited. 

Top salespeople are motivated by the potential for unlimited earnings. To increase your commissions, you’re likely to work harder and sell more — resulting in increased revenue for the company. By offering an uncapped plan, companies can attract top sales talent and increase their revenue.

Challenges and Considerations

Sustainability for Employers (is a Finance Problem)

When considering whether to implement an uncapped sales compensation plan, some parts of the business — ahem, finance — worry about the sustainability of such a plan for employers. 

In an article on SalesGlobe, finance leaders expressed concern that uncapped plans can lead to unintended consequences, such as overpayment, increased cost of sales, and negative impact on profit margins. 

That’s all fine, but we’d argue that those issues aren’t caused by uncapped commissions but poorly structured compensation plans. If the CFO is worried about “overpaying” sellers, the solution isn’t to cap commissions —removing the incentive to keep selling — but to address the miscalculation of commission amounts per deal.

When sales leadership structures the comp plan correctly, it should be impossible to overpay a sales pro.

Employee Expectations

Another consideration when implementing an uncapped sales compensation plan is managing employee expectations. While uncapped plans can be motivating for high-performing sales reps, they can also lead to disappointment and frustration for those who fall short of their goals. 

In some cases, sales reps may find their comp plans difficult to understand, and that can lead to confusion and dissatisfaction — particularly if reps feel that their payouts are not commensurate with their efforts.

Good employers will provide clear and transparent communication about the goals and expectations of the uncapped plan. This can include realistic performance targets, providing regular feedback and coaching, and offering training and development opportunities to help reps improve their skills and achieve their goals. Additionally, they’ll be prepared to address any concerns or complaints from reps who feel that their payouts are unfair or inadequate.