Should SDRs and AEs Get Merit Increases? How to Design Compensation Plans That Drive Results and Maximize Commission

Introduction

Picture this: You’ve been crushing quota for months, leading the team leaderboard, and showing up big time for the company. Yet, every paycheck feels like it’s missing something. Sure, you’re hitting accelerators on your commission, but that base pay hasn’t budged since you started. You can’t help but wonder, “Shouldn’t my hard work translate into more than just commission?”

If you’ve ever been caught in this loop, you’re not alone. Many sales reps—whether SDRs, AEs, or even team leaders—wrestle with how merit increases and compensation plans impact their long-term earning potential. In this blog, we’ll tackle the age-old question: “Do raises matter for commission-based roles?” We’ll break down the essential components of effective compensation, uncover tips to maximize your earnings, and explore how sales leaders can design plans that actually work.

Let’s get into it.

Why Base Pay Still Matters (Even for Commission-Based Roles)

A Story of Two Sales Reps

Meet Chris and Taylor. Both are AEs at a mid-market SaaS company.

Chris earns a hefty commission and loves the thrill of closing deals. But when sales slow down in Q3, that paycheck shrinks faster than Taylor Swift tickets sell out. Suddenly, Chris is scrambling to pay bills.

Taylor, on the other hand, negotiated a solid base salary. Even when deals slow, their income remains steady, which gives them the confidence to stay focused on high-value deals without panicking.

What’s the takeaway? Commission may be the primary driver, but base pay creates financial stability—and, let’s face it, less stress means better performance.

The Psychological Edge of Merit Increases

Merit raises aren’t just about money. They send a powerful message: You’re valued here.

Studies show that even a modest raise can have a major impact on employee morale. Why? Because it’s a tangible acknowledgment of your contributions. This psychological boost can translate into:

Increased loyalty to the company.

Renewed motivation to hit stretch goals.

Greater willingness to collaborate with the team.

On the flip side, stagnant base pay—even with high commissions—can lead to burnout. The message it sends? We care about your numbers, not you.

The Long-Term View of Merit Increases

Sure, commissions can eclipse a merit increase over time. But think of a raise as a foundation. As your career progresses, that higher base becomes your starting point for future roles or promotions.

For example:

Chris’s base salary stayed the same for 3 years, despite hitting 120% of quota consistently.

Taylor received 5% merit increases each year. After 3 years, Taylor’s base is 15% higher—and combined with commissions, they’re making significantly more.

Moral of the story? Raises compound over time. They’re not just about the present—they’re an investment in your future.

Building a Compensation Plan That Drives Results

Beyond the Basics: Structuring Pay That Works for SDRs and AEs

You already know the staples of sales comp: base pay, commissions, and bonuses. But the real magic happens when those elements are tailored to fit the role. Here’s how:

SDR Compensation

Focus on What They Control: SDRs can’t close deals, but they can generate qualified leads. Tie their commission to handoffs that result in pipeline conversions.

Use Bonuses to Reinforce Behavior: Booked five demos with C-suite decision-makers this month? Boom, $500 bonus.

AE Compensation

Link Pay to Outcomes: AEs drive revenue, so their commission should be tied to deal size, closed-won revenue, or ARR (annual recurring revenue).

Reward Cross-Selling and Upselling: Add incentives for expanding deals within existing accounts.

Should You Include Draws in Your Plan?

Draws are a common safety net for sales reps—especially those just starting out or ramping up in a new role. But they’re not one-size-fits-all.

Pros of Draws:

Provide stability in slower months (think: Q1 droughts).

Attract newer reps who might be wary of full commission.

Cons of Draws:

Can demotivate seasoned reps who prefer a “sky’s the limit” earning model.

If not structured properly, they can lead to confusion or resentment.

If you’re a leader, consider offering a recoverable draw for new hires during their first 3-6 months, then transition to full commission once they’re up to speed.

SPIFs: The Secret Weapon for Short-Term Motivation

Let’s talk SPIFs (Sales Performance Incentive Funds). These are the unexpected rewards—think gift cards, cash bonuses, or extra PTO—that sales reps love.

Example:

Got a big product launch coming up? Offer a $1,000 SPIF to the first rep who closes a deal with the new feature.

Why they work: SPIFs tap into short-term motivation without overhauling your entire comp plan. They’re like the cherry on top of your commission sundae.

How Sales Reps Can Take Control of Their Compensation

Moving Beyond the Basics

Maximizing your earnings isn’t just about working harder—it’s about working smarter.

Here’s a framework to help you rethink your strategy:

1. Track Your Metrics Like a Pro

Keep a personal dashboard of your performance.

How many leads are converting to closed deals?

What’s your average deal size?

Are you hitting accelerators consistently?

The more you know about your numbers, the easier it is to spot areas for improvement—and negotiate better pay.

2. Build Relationships with Decision-Makers

Your VP of Sales isn’t just there to approve expense reports. Get on their radar by:

Sharing insights on what’s working (or not) in the field.

Asking for mentorship on closing larger deals.

When leadership sees your initiative, you’re more likely to be rewarded—whether through a raise, promotion, or special project.

3. Invest in Skill Development

Top performers aren’t born—they’re made. Use your downtime to:

Hone your discovery skills (because great discovery = easier closes).

Learn new sales methodologies like MEDDIC or SPIN.

Master emerging tools like sales AI platforms (e.g., GTM.bot) to gain a competitive edge.

Common Pitfalls in Sales Compensation Plans

Here are a few mistakes sales teams make—and how to avoid them:

Too Many Metrics: Measuring everything dilutes focus. Instead, track 2-3 key metrics for each role (e.g., qualified leads for SDRs, quota attainment for AEs).

Neglecting Team Goals: Individual commissions are great, but don’t forget team-wide incentives that promote collaboration.

Ignoring Feedback: Reps know what’s working in the field. Tap into their insights to adjust your plan accordingly.

Advocating for Merit Increases or Better Pay

Sales reps, you can negotiate better pay—it just takes the right approach.

Frame the Conversation with Data

Show your impact on pipeline and closed revenue.

Highlight areas where you’ve gone above and beyond, like mentoring junior reps or driving adoption of new tools.

Timing Is Everything

The best time to bring up compensation?

After hitting a major milestone (e.g., closing a record-breaking deal).

During performance reviews, when leadership is already evaluating contributions.

Conclusion

Merit increases might not be the first thing on every salesperson’s wish list, but they’re a critical piece of the compensation puzzle. When paired with a well-designed commission plan, they create a balance of stability and motivation.

Whether you’re an SDR building pipeline, an AE chasing enterprise deals, or a leader crafting comp plans, remember this: Compensation isn’t just about the numbers—it’s about creating a system that rewards performance, retains talent, and drives long-term growth.

FAQs

How do merit increases differ from commission plan changes?

Merit increases are adjustments to your base salary, often based on performance, tenure, or market benchmarks. Commission plan changes, on the other hand, directly affect how much you earn for hitting sales targets. Merit raises provide long-term stability, while commission updates impact short-term earnings potential.

How can I prove I deserve a merit increase as a sales rep?

Bring data to the table. Show consistent quota attainment or overachievement. Highlight your contributions to the team beyond revenue, like mentoring peers or improving processes. Compare your base pay to industry benchmarks to justify why a raise is appropriate.

Can SPIFs replace a solid comp plan?

No way. SPIFs are like dessert—they’re a bonus, not the meal. A strong base and commission structure should always come first.

What’s a healthy quota attainment percentage?

Most companies aim for 70-80% of reps hitting quota. If it’s lower, your targets might be unrealistic.

How can I predict my earning potential?

Use historical data to calculate average commissions, then layer in accelerators and bonuses for a clearer picture.