By enabling the automatic commission rates feature when building components, Admins can streamline calculating commission rates, reduce errors, and increase visibility into compensation plan details. In this article, you'll learn how to set up automatic commission rates, including entering base salary and variable pay information for your reps, generating rates, and including this in plan verification requests.

Before getting started, here are a few helpful compensation formulas that are foundational to calculating commission rates:

To set up automatic commission rates in your workspace, follow the below steps.

The first step to setting up automatic commission rates is to enable the "Enable automatic rate calculations" toggle in the component builder. You will see this toggle when building an earnings component that contains an earnings rule based on commissions:

Since commission rates are applied to revenue numbers to calculate commissions, automatic commission rates only apply to earnings rules based on currency field types, not number field types.

If the quota for this path changes over time, the commission rate will also need to change over time, so this feature will be automatically enabled for you.

After enabling the toggle, the next step is to set the variable pay component weighting, which determines how much of the total variable pay is allocated towards payout on this component. In other words, it determines the numerator in the above formula for calculating a commission rate. Component weighting is required for every component for which a commission rate will need to be calculated.

The component weightings across components do NOT need to add up to 100%. In addition, the variable pay component weighting does NOT need to take into account the time period, as QuotaPath will automatically prorate the variable pay amount based on the quota and earnings period.

Next, if applicable, you'll need to enter the default base commission rate and multipliers for each tier. The default commission rate will be used in the event that the variable and quota are not entered and/or the commission rates are not generated.

The multiplier needs to be entered in a number format and can include up to 6 decimal places. Multipliers can NOT change over time, so if the multiplier will change within the plan's effective dates, a new plan will need to be created.

After all the components in the plan have been built, assign users to the plan and enter their base salary and variable pay amounts.

The base salary and variable pay amounts should be annualized, regardless of the effective dates of the plan or the quota/rate periods.

Only the variable pay will be used to calculate the commission rate. Both the base salary and variable pay can later be included in plan verification.

After assigning users to the plan and entering the base salary and variable pay amounts, the last step is to generate the commission rates.

Open a component in a plan, and click 'Manage Rates'. In the rate table, you'll see the variable amount to be used in the commission rate calculation next to the plan assignee's name. Before generating the commission rates, hover over the variable amount for a calculation breakdown to confirm accuracy.

If you've already set the quotas for each user and reviewed the variable pay breakdown, the last step is to generate the commission rates.

Click the calculate rates button to generate the commission rates. You can calculate a specific period or all periods. To finish, click 'Continue' and select 'Save' at the bottom of the component details page.

If new users are assigned to the plan, you'll need to return to this page to generate the rates.

After you've set up automatic commission rates and are ready to send a plan for verification, you can choose whether to include the base salary, variable pay, and on-target earnings in the plan verification. The on-target earnings will be automatically calculated by summing the base salary and variable pay.

In the plan verification preview, check the boxes of which compensation details to include in the request. Plan assignees will only see their assigned base salary, variable pay, quotas, and commission rates.