A SPIFF (Sales Performance Incentive Fund) is a short-term cash incentive tied to a specific, immediate action, usually selling a particular product, hitting a short-window target, or pushing a specific behavior the company wants right now.

SPIFFs are built for speed. They're announced, run for a defined stretch, usually days or weeks, and paid out fast, sometimes even same-day or same-week, specifically because the immediacy is what makes them effective. A SPIFF isn't meant to replace commission, it's meant to temporarily redirect a rep's attention toward something specific: clearing old inventory, pushing a new product launch, or closing out a slow month with extra motivation.

A draw in sales compensation is a guaranteed advance payment made to a salesperson against their future commissions. This means it is an advance against future commission, paid out on a regular schedule, usually monthly, so reps have predictable income before their pipeline turns into closed deals and actual commission.

Companies use draws to protect new reps' income during ramp. A brand-new AE with a three-month sales cycle isn't going to close anything in week two, but they still need to pay rent. A draw bridges that gap.

For sales professionals, understanding draw type matters because it affects real take-home pay, not just cash flow timing. Two reps can be offered the exact same dollar amount as a "draw" and end up with completely different financial outcomes, depending on which type it actually is.

Before comparing pay, it helps to be clear on what each role is actually on the hook for. They sit on the same team, but they're not doing the same job.

What Does an SDR Do?

SDRs own the top of the funnel. Their day is built around prospecting, outbound outreach, and lead qualification, all pointed at one outcome: booking meetings and creating a pipeline for AEs to work. SDRs generally aren't responsible for closing deals. Their job ends where the AE's job begins.

What Does an AE Do?

AEs own the deal once it's qualified. That means running discovery calls, delivering product demos, negotiating terms, and closing the deal. AEs carry direct revenue ownership, and in a lot of organizations, they also handle account management once the deal is signed. The pressure sits differently here: an AE's number is measured in dollars closed, not meetings booked.

On-Target Earnings is the total amount a salesperson can expect to earn in a year if they hit 100% of their quota. It's not a bonus on top of salary. It's not a best-case fantasy number. It's the standard, expected outcome for someone doing the job at the level it was designed for.

Companies use OTE because it gives candidates and employees a complete picture of earning potential, not just the guaranteed piece. A $60,000 base salary sounds very different from a $60,000 base with a $120,000 OTE. Both numbers matter, and OTE tells the fuller story.

For sales professionals, OTE matters because it's usually the number you're actually being sold on. It shows up in job postings, offer letters, and recruiter pitches. If you don't understand how it's built, you can't judge whether it's realistic or whether you're being handed an inflated number to close the deal on you.

The simplest structure there is: one commission rate applied to every dollar of revenue a rep closes. Sell $120,000 at an 8% rate and you earn $9,600. No tiers, no thresholds, no math anyone needs a spreadsheet to follow.

Formula: Commission = Revenue closed × Commission rate

When to use it: Flat-rate works best when deals are relatively uniform and margins are predictable: inbound or SDR-sourced pipelines, transactional sales, or the early days of a team when you want a plan reps can understand in one sentence. Its weakness is that it treats the first dollar and the hundredth-percent-of-quota dollar exactly the same, so it does little to push overperformance.

A sales compensation structure is the framework that determines how sales representatives are paid. It combines fixed compensation, such as base salary, with variable compensation tied to performance, including commissions, bonuses, incentives, or profit-sharing arrangements.

The purpose of a compensation structure is not simply to pay employees. It is designed to:

• Motivate sales performance
• Attract and retain top talent
• Align sales activities with company objectives
• Reward desired outcomes
• Maintain predictable compensation costs

An effective compensation plan creates a clear connection between performance and earnings while remaining simple enough for employees to understand.