Tiered Commission Structure

A tiered commission structure is a system where your commission rate increases as you hit higher production levels, like climbing stairs where each step up gives you a better rate. The more you sell, the higher percentage you earn on your sales.

Why does this matter? Tiered structures motivate agents to push beyond minimum quotas by rewarding higher performance with better compensation. They also help agencies retain top performers by ensuring their best producers are compensated at premium rates.

How it works: Your sales volume determines which tier you're in, and each tier has its own commission rate. For example, your first $100K in sales might earn 50% commission, while sales from $100K to $250K earn 60%, and everything above $250K earns 70%. Some structures are incremental (only the sales in each tier get that tier's rate), while others are retroactive (reaching a new tier recalculates all your sales at the higher rate).

You'll encounter tiered structures in most insurance agencies because they balance the agency's need to control costs at lower production levels while still rewarding high performers. They're especially common in life insurance and financial services where individual sale sizes can vary dramatically.

The biggest confusion comes from not understanding whether your tiers are incremental or retroactive, which can mean thousands of dollars difference in your commission calculations.