Tiered vs Progressive Commission
The confusion
Both structures use bands. Both raise the rate as attainment rises. Both are described as "tiered." And on the same performance, one can pay 73% more than the other.
The difference is not in the rates. It is in one unstated sentence: does the higher rate apply to everything, or only to the revenue inside its band?
Tiered (retroactive) vs progressive (marginal)
The same revenue, two payouts
The plan. 8% to 100%, 12% from 100–120%, 16% above 120%. Quota $1,000,000.
What this means?
Look at row two. Under a retroactive structure, $2,000 of additional revenue produces $40,000 of additional commission. That is the cliff, and it is why retroactive plans generate the behaviour they generate: a rep sitting at 98% attainment in the last week of the quarter will do almost anything — discount hard, pull a deal forward, argue about a close date — to get across that line. The marginal deal is worth twenty times its own commission.
Under a progressive structure, that same $2,000 of revenue is worth $200. Nobody destroys margin over $200.
Which should you use?
Progressive, in almost every case. It is linear, predictable, has no cliff, and scales to any number of bands. It is what most plans actually implement, whether or not they say so.
Retroactive has one legitimate use: when you specifically want an all-or-nothing push to a single threshold, and you accept the behaviour that comes with it. Some companies use a retroactive structure at exactly 100% and progressive bands above it — a deliberate cliff at quota, then a smooth curve. That is a defensible design, and it is a design, not an accident.
What is not defensible is having a retroactive structure by accident, because someone wrote the spreadsheet formula that way and nobody checked.
Why this matters for finance teams
The application method is the single largest uncontrolled variable in commission expense. On the numbers above, retroactive costs 73% more at 130% attainment for identical performance — and it costs it in a step, at an unpredictable moment, for an unpredictable number of reps.
It also concentrates cost precisely at the quota line, where the most reps sit. A team clustered around 100% attainment on a retroactive plan is the most expensive possible outcome, and it is also the most likely one.
Common mistakes
1. Not stating the method
One sentence in the plan document. It is worth tens of thousands per rep and it is missing from most plans.
2. Letting the spreadsheet decide
Whether a nested IF re-rates everything or only the band above is a formula detail that becomes company policy the moment nobody reviews it.
3. Assuming reps understand
Reps assume retroactive. Plans usually implement progressive. That mismatch is the disagreement, and it arrives at payout.
How Visdum handles both
In Visdum the application method is an explicit setting on the rate table, not an emergent property of a formula — so progressive and retroactive are both fully supported and neither happens by accident. Model a candidate table both ways against your own historical attainment distribution and see the cost difference before you commit, including the cost concentration around the quota line. Reps see, per deal, which band applied and at what rate, so a progressive plan reads as arithmetic they can follow rather than a total that fell short of what they expected.
Take a self-guided product tour →, or read progressive commission.
Related terms
Tiered Commission · Progressive Commission · Rate Table · Accelerator · Effective Commission Rate
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Frequently asked questions
What is the difference between tiered and progressive commission?
The application method. A tiered (retroactive) structure re-rates all revenue at the rate of the highest band reached. A progressive (marginal) structure applies each rate only to revenue inside its own band. On the same $1.3M performance against a $1M quota, the difference can be $120,000 versus $208,000 — a 73% gap.
What is a commission cliff?
The discontinuity created by a retroactive tier. If reaching 100% attainment re-rates everything from 8% to 12%, then $2,000 of additional revenue at the quota line produces roughly $40,000 of additional commission. The marginal deal becomes worth twenty times its own commission, which is why reps at 98% attainment will discount hard to cross the line.
Which is more common, tiered or progressive?
Progressive is what most plans actually implement, whether or not the document says so. Retroactive is what most reps assume, because it matches the intuitive reading — "I hit the 12% tier, so I get 12%." The mismatch between what the plan does and what the rep expects is where most commission disputes originate.
Which structure should we use?
Progressive, in almost every case: it is linear, predictable, has no cliff, and scales to any number of bands. Retroactive has one legitimate use — when you specifically want an all-or-nothing push to a single threshold and accept the behaviour that follows. Some plans use a deliberate cliff at 100% and progressive bands above it, which is a design rather than an accident.
Why is a retroactive structure expensive?
Because it costs the most at exactly the attainment level where the most reps sit. A team clustered around 100% is the most expensive possible outcome under a retroactive plan, and it is also the most likely one. The cost arrives as a step, at an unpredictable moment, for an unpredictable number of reps.
How do I know which structure my plan uses?
You may not be able to tell from the document, which is the problem. Most plans state the bands and the rates and omit the application method entirely — leaving it to be determined by how a nested formula was written in a spreadsheet. Ask directly: does reaching a tier re-rate everything, or only the revenue inside it?