Uncapped commissions are every sales rep’s dream. They open the door to unlimited earnings on deals closed and are a key motivator to salespeople. This propels them to boost their performance and close as many deals as possible to earn more.
In this blog, I’ll walk you through everything you need to know about uncapped commissions, along with the difference between capped and uncapped commissions. I’ll also cover the benefits and a few reasons why you should not mention them in your job descriptions.
What is uncapped commission?
Uncapped commissions are a structure where there is no limit on the amount of commission a salesperson can earn.
For instance, you get 10% commission on every sale and the commission cap is $5000. It means if you bring a revenue of $50,000 then you will make $5000. But if you bring more than $50,000, you won't make more commission because of the cap.
But with uncapped commission, there is no $5000 commission cap. It means if you bring more than $50,000 in revenue, you get the proportionate commission for it.
Uncapped commission meaning
It means you can keep bringing revenue and gain commissions on it. There is no limit on revenue you should bring, which means there is no limit on commissions you can make. However, the rate of commission is fixed.
A comparison between uncapped and capped commissions
Here's how capped and uncapped commission differ:
Uncapped commission structure
Uncapped commission works by providing employees with the opportunity to earn as much commission as they can generate, without any upper limit.Here's how it typically works:
Base salary (optional)
Some employees may receive a base salary in addition to their commission. In other cases, the compensation might be entirely commission-based in specific industries.
Commission rate
Employees earn a percentage of the revenue, profit, or another financial metric tied to their performance. For example, a salesperson might earn a 10% commission on every sale they make.
The commission rate can be a flat rate or a percentage, but there is no quota to hit. Commission can also be in tiers where they get bigger percentages as they go up the tier.
Read: Hitting quota and measuring it
Clawbacks (optional)
Some uncapped commission plans may include clawback provisions. If a sale falls through or a candidate leaves shortly after placement, the commission may be deducted from future earnings.
Tiers
Salespeople earn higher commission rates as they achieve higher sales levels. The commission rate increases at predefined sales thresholds or quotas, motivating salespeople to surpass these benchmarks. This way, there is no cap only on the highest tier.
Top 4 Benefits of Uncapped Commission
Here are the best four benefits of using uncapped commission:
1. More revenue for the company
Salespeople are motivated by the potential for unlimited earnings. To increase their commissions, they’re likely to work harder and sell more – resulting in increased revenue for the company.
Salespeople also have the flexibility to prioritize their sales efforts and increase earning potential.
How?
They can choose which sales to focus on and how much effort to put into each sale to maximize their commission earnings.
Additionally, uncapped commissions increase salesperson morale and reduce turnover, leading to better retention and cost savings for the company.
2. Unlimited earning potential for salespeople
The biggest advantage of an uncapped commission structure is the unlimited earning potential it provides to salespeople.
How is this helpful?
This means they can earn as much as they want based on their sales performance, which can provide a strong motivation for them to perform at their best.
3. Drives employee growth
Uncapped commissions can encourage salespeople to prioritize their efforts on high-value sales, which aligns with a company's business goals. This helps to drive growth and profitability for the company.
Additionally, salespeople can feel motivated to provide better customer service and build long-term relationships with clients. This leads to repeat business and increased commission earnings.
4. Creates a transparent and rewarding work culture
An uncapped commission structure allows leaders to demonstrate transparency and fairness in their compensation policies. Doing so builds trust and improves relationships between leaders and salespeople.
Moreover, uncapped commissions provide a clear and direct recognition of salespeople's performance. This motivated your salespeople to perform better and to be in the limelight.
Plus, working closely with the organization's goals inculcates trust and collaboration.
4 Significant Drawbacks of Uncapped Commissions and how to fix it
Sure, uncapped commissions can be a powerful motivator for some salespeople.
However, they also come with a range of potential drawbacks and should be carefully considered before being included in a job description.
Let’s take a quick look at some of them:
1. Not meeting average sales targets
In a quota-based structure, there is a number that has to be hit to be able to receive commissions. This ensures salespeople are not underperforming and getting away with just a few deals and its commission.
You can keep a minimum requirement and also tiers. This way, you will know, who the underperformers are and how many are able to move up the tiers.
2. Unbalanced workloads
Some salespeople may be more successful than others because of the time they are able to give to close more deals. This leads to uneven workloads and can result in a potentially demotivating effect on salespeople who want to have a work-life balance.
Encourage a good work-life balance.
3. Ethical concerns
Uncapped commission structures can create incentives for salespeople to engage in unethical or aggressive sales tactics to maximize their earnings.
Invest in conducting sales performance reviews regularly and calling out good and bad aspects.
4. Lack of clarity for salespeople
With no cap on commission, income can vary widely from month to month, creating financial instability. If sales cycles are long or inconsistent, this variability can make it difficult for employees to plan financially, reducing the attractiveness of the compensation package.
Some salespeople may not be motivated by the prospect of unlimited earning potential and may prefer a more structured and predictable compensation plan.
Similarly, the company also will have an unpredictable payroll.
So what does uncapped commission really mean?
A company should know how many of its sales team members consistently hit their quotas each month. They should also provide detailed insights into the average commission earned by their salespeople—not just the top performers, but the average rep. This transparency helps you set realistic expectations.
Moreover, if a company only emphasizes financial incentives, it might indicate a limited understanding of what truly drives salespeople. While money is a key motivator for many, other factors—like career development opportunities, recognition, work-life balance, and a supportive work environment—are equally important. A company that neglects these aspects might struggle to sustain long-term motivation and loyalty within its sales team.
In the end, a well-rounded compensation and reward system that includes financial and non-financial incentives can foster a more motivated, engaged, and high-performing sales force.
What should you prefer as a job seeker? Uncapped commissions or OTE (On-target earnings)
On-Target Earnings (OTE) provides a balanced approach, giving employees a clear and predictable income if they meet their goals while still offering some performance-based incentives. It’s best suited for environments where stability and clarity are prioritized alongside motivation to hit targets.
Uncapped Commission is ideal for sales environments where top performers are expected to exceed targets regularly, offering potentially unlimited earnings. However, it comes with income variability and requires clear communication to set realistic expectations.
If you are in RevOps handling commissions, then check out how automate commission calculation with a sales compensation software.
