Intro: The solar energy industry has been booming, with an average annual growth rate of about 22% over the last decadecorecommissions.com. To capitalize on this growth, solar companies rely heavily on sales commissions to motivate their teamscorecommissions.com. A well-designed solar sales commission structure can inspire reps to close more deals, while a poor plan might leave them disengaged. In this article, we explore five effective commission structures in the solar industry that help drive sales. We’ll discuss how each structure works and when it makes sense to use it, so you can align your compensation plan with your business goals.
1. Straight Percentage of Sales (Revenue-Based Commission)
This is the simplest and most common approach: paying a fixed percentage of each sale’s value as commission. For example, a solar installer might pay a 5% commission on the contract price of each solar system sold. If a rep closes a $20,000 deal, they earn $1,000 at a 5% rate. Revenue-based commissions directly tie a salesperson’s earnings to the value of their sales, which incentivizes reps to close bigger deals. It’s straightforward and easy to understand – essentially, the more they sell, the more they earn.
Why it drives sales: A straight percentage commission aligns the salesperson’s goals with the company’s revenue goals. Reps are motivated to increase sales volume and upsell customers on larger systems or add-ons because their commission grows with each additional dollar of sales. This structure works especially well for companies focusing on high-volume sales or big-ticket installations, since every sale boosts both company revenue and the rep’s pay. (However, ensure the percentage is sustainable for your margins and clearly communicated to reps to avoid confusion.)
2. Commission on Gross Margin (Profit-Based Commission)
Another approach is to base commissions on gross margin (profit) instead of total revenue. In this profit-based commission model, the salesperson earns a percentage of the profit on each sale. For example, if a solar project sells for $20,000 but costs the company $15,000 to fulfill, the gross profit is $5,000; the rep might earn 10% of that profit ($500) as commission. This structure encourages salespeople to prioritize high-margin sales rather than just volume.
Why it drives sales: By rewarding profitability, this commission structure drives reps to not only sell more, but sell smarter. Reps learn that discounting too heavily or pushing low-margin deals will shrink their payout, whereas selling at a healthy margin or upselling value-added services will boost their commissionzencentiv.com. For solar companies concerned with maintaining strong margins, a gross-margin commission aligns the sales team’s incentives with the company’s financial health. It discourages “buying the sale” through excessive discounts and instead promotes value-based selling. (The trade-off is complexity – you’ll need to be transparent about costs and calculations so reps trust how their commission is determined.)
3. Tiered Commission Structure (Accelerators for High Performance)
A tiered commission structure rewards salespeople with higher commission rates once they reach certain performance thresholds. In solar sales, this might mean if a rep exceeds a quota or target, any additional sales in that period earn a higher rate. For example, a company might pay 5% on sales up to $100,000 in a quarter, then bump it to 7% for revenue beyond $100,000. Similarly, it could be structured by number of installations — say, $500 commission per sale for the first 10 sales in a month, then $700 per sale thereafter.
Why it drives sales: Tiered commissions create a strong incentive to surpass targets rather than just meet them. A rep who knows they’ll earn a higher rate after hitting a goal is motivated to push for that next level. This helps combat the plateau effect (when reps relax after hitting quota). However, it’s crucial to implement tiered structures carefully to avoid common pitfalls. For more on this, check out our guide on Common Commission Calculation Mistakes to Avoid. In a solar company, a tiered plan can lead to reps squeezing in an extra deal or two before the quarter ends to hit the bonus tier. It boosts overall sales volume and rewards top performers, which aids morale and retention. (The key is setting attainable yet challenging tier levels and ensuring reps understand the rules.)
4. Base Salary Plus Commission (Hybrid Model)
Not all solar sales roles are commission-only. Many companies use a hybrid compensation model that combines a base salary with commission. For example, a solar sales consultant might receive a base salary (providing stable income) and then a smaller commission on each sale. The base pay gives reps some security during slower periods, while the variable portion still rewards strong performance.
Why it drives sales: A base-plus-commission structure can attract a broader range of sales talent and keep them motivated. Reps appreciate the financial stability of a base salary, which can reduce stress and turnover, especially in a long sales cycle industry like solar. At the same time, the commission component ensures they still have “skin in the game” to close deals. This balanced approach often leads to more consistent effort: salespeople can focus on customer relationships and quality service without worrying as much about short-term income dips, knowing they have a safety net. In the long run, that can translate to higher overall sales and better customer satisfaction.
Considerations: Offering base salaries increases fixed costs, so commission rates in hybrid plans are usually lower than in pure commission setups. It’s important to calibrate the mix so that top performers still earn attractive total pay. Make sure to set clear performance expectations even for salaried reps. When done correctly, a hybrid model can be a win-win, providing motivation as well as stability.
5. Team-Based and Split Commissions (Shared Incentives)
Solar sales often involve teamwork. Many companies employ lead generators or canvassers who set up appointments, as well as closers who finalize deals, and sales managers who oversee teams. A team-based commission structure splits commission among multiple roles or provides an override to managers. For example, a canvasser might earn a bonus or small percentage for each sale that came from an appointment they set, while the closing rep earns the majority of the commission. If a sale yields a $2,000 total commission, perhaps $500 goes to the canvasser and $1,500 to the closer. Likewise, a territory manager might earn an override commission of 1–2% of all sales in their region as a reward for coaching the team.
Why it drives sales: This structure ensures everyone who contributes to a sale is rewarded, which boosts collaboration. Canvassers work harder to bring in quality leads if they know they earn, say, $50 or $100 for each lead that converts. Closers benefit from a steady pipeline of appointments set by motivated canvassers. The overall effect is more leads and more closed deals. Meanwhile, managers with overrides have a direct stake in their team’s success, spurring them to train and support reps to hit targets. In an industry like solar, where door-to-door prospecting and referrals play a big role, split commissions can significantly increase sales by encouraging teamwork.
Considerations: Splitting commissions requires clear rules to avoid confusion. Define how credit is assigned and how much each role receives, and document it in your compensation plan. It’s also important not to dilute incentives too much — the closer should still receive a strong reward for sealing the deal, and a manager’s cut shouldn’t come at the expense of the rep’s main commission. Using software to track leads and sales can help allocate commissions fairly. With a solid plan and the right tools to administer it, team-based commissions can improve sales and morale together.
Tailoring Your Commission Plan
Each of these structures has its advantages, and many solar companies use a combination. The right mix depends on your sales strategy and business objectives. For example, if rapid customer acquisition is the goal, a generous revenue-based or tiered plan might spur quick wins. If maintaining margin is critical, profit-based commissions could be better. Often a hybrid approach is ideal – you might give canvassers a per-lead bonus, offer reps a base salary plus commission or a tiered incentive, and give managers an override.
Remember to revisit your commission plan periodically. Market conditions and company goals change, and your compensation strategy should adapt. Gather feedback from your team to see if the plan is motivating the right behaviors (and not causing unintended issues). Adjust as needed to keep it fair and effective.
Finally, consider the practical side of managing commissions. Complex plans with tiers or splits can be challenging to calculate manually. Leveraging a commission management platform (see our [commission management guide]) can save time and eliminate errors. The goal is to spend less time on admin and more time closing deals. With a well-crafted commission structure – and the right tools to track it – you’ll set your solar sales team up for success.
FAQ
Q: What is a typical commission rate for solar sales reps?
A: Commission rates for solar sales vary, but often a rep working on straight commission might earn around 5–10% of the contract value per sale. Some companies instead pay a flat amount per sale or per kilowatt of solar installed. If a base salary is included, the commission percentage is usually lower (e.g. 2–5%). The exact numbers depend on the company’s pricing and compensation philosophy. In any case, strong solar salespeople can earn a healthy income, as commissions from large solar projects add up quickly.
Q: What is a “redline” commission model mean in solar?
A: A “redline” commission model is a compensation approach where the company sets a minimum price (the redline) for each project, and the salesperson’s commission is based on any amount they sell above that price. In practice, if the redline price for a solar system is $15,000 and the rep closes a deal at $18,000, the extra $3,000 is above the redline. The rep’s commission would then be tied to that $3,000 – in some cases, it could be the entire $3,000 (if the plan allows keeping the full difference), or more commonly a percentage of it. This model essentially lets sales reps control the margin on their deals: they can offer discounts down to the redline (to close price-sensitive customers), or sell at a higher price to earn more commission. Redline structures can be very motivating for experienced reps because of the high earning potential and flexibility. However, they require careful oversight to ensure pricing remains reasonable. Companies using redline plans typically set guidelines on maximum discounts or have approval processes to prevent extreme pricing. When managed well, a redline commission can drive both sales volume and profitability by empowering reps to maximize each deal.
To see how you can implement these structures with less hassle, explore our solar payroll software page.