Compensation Plan Examples & Templates for 7 Scenarios

Compensation plans outline how employees are paid and rewarded for their work. A well-designed plan can attract talent, motivate performance, and ensure fairness.

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This guide covers four common types of compensation plans–salary-based, commission-based, bonus structures, and equity compensation–with examples across industries.

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It also provides template ideas (Excel, Word, Google Sheets) for each plan type and guidance on customizing them.

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Finally, we explain how to use PerformYard software to assist with compensation planning, including setting up salary bands, tracking performance-based pay, and managing bonuses. 

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Salary-Based Compensation Plan Examples

Salary-based compensation provides employees a fixed regular pay (hourly wage or annual salary) regardless of short-term performance​. In a straight salary plan (also called salary-only), employees receive a predictable paycheck with no additional incentives like commissions​.

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This approach is common for roles focused on steady work output or service rather than direct sales. It offers stability for employees and simplicity for employers–payroll costs are easy to budget since pay doesn’t fluctuate each period​.

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A salary-only plan can also foster a collaborative environment because there’s no internal competition for commissions​. Though, without performance-based incentives, it may provide less motivation to exceed basic expectations​.

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Salary-based plans are the norm in many industries. For example, in technology companies, software engineers and designers are typically paid a fixed annual salary (often with potential annual raises or bonuses, but their core compensation is salary). In the public sector and education, employees usually follow salary schedules or pay grades based on position and tenure. Many administrative, operations, and customer service roles also use salary-only compensation, as consistent service quality is the priority. Even in sales-heavy industries, certain positions rely on salary pay. For instance, a customer success manager or support rep might be salaried if their role focuses on relationship-building rather than closing new deals​.

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Overall, any role with a long value delivery cycle or emphasis on teamwork (e.g. project managers, researchers, nurses) may use salary-based pay to ensure stability and teamwork.

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Here are a few examples to further explain the approach:

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• A marketing coordinator at a mid-sized firm might earn a salary of $50,000 per year, paid biweekly. This pay remains the same regardless of monthly output, though the employee may get a raise during an annual review.

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• In manufacturing, an assembly supervisor could have an annual salary of $70,000 with no commission–their focus is on managing quality and safety, so consistent pay keeps them focused on the job rather than short-term sales.

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• In retail management, a store manager might earn a fixed salary (e.g. $45,000/year) to run the store, with any incentives coming as separate bonuses rather than changing their base pay.

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Salary-Based Compensation Plan Template

Companies often establish salary bands or pay grades to manage salary-based plans. A simple spreadsheet can list each job level and the minimum, midpoint, and maximum salary for that level. For example:

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In Excel or Google Sheets, you can use this template to track current salaries against the range. For instance, add columns for each employee’s actual salary and highlight if anyone is below or above their band. This helps with budgeting and ensuring internal equity. Excel formulas or conditional formatting can flag salaries outside the set range. A Word or Google Docs template can complement this by documenting the salary grades policy (e.g., describing criteria for each grade and how promotions or raises are handled).

When customizing the template, adjust the grade names and ranges for your industry and company size (e.g. a tech startup’s salary bands will differ from a hospital or a nonprofit). Be sure to incorporate market data for your region and role.

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Salary templates can also include columns for annual merit increase percentages or timestamps of last raise, which you can modify based on your company’s raise cycle.

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It’s also important to adapt salary templates to reflect your business needs. For instance, if you operate in multiple locations, you might add separate ranges for each region or country to account for cost-of-living differences. Or, if your organization has unique roles, group them into custom bands (perhaps creative roles in one band, technical in another). Finally, ensure the salary ranges align with your compensation philosophy. If you aim to pay at the 75th percentile of the market, set your midpoint accordingly.

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Commission-Based Compensation Plan Examples

Commission-based compensation ties earnings to performance outcomes, typically sales volume or revenue generated. Employees earn commissions as a percentage or portion of the sales they close, sometimes in addition to a smaller base salary. A very common model is base salary plus commission, which gives employees a fixed income floor and an incentive on top​.

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For example, a technology sales representative might receive a $50,000 base salary plus a 10% commission on each software license sold​.

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In many companies, this base/commission split is around 60/40 (60% of total on base pay, 40% variable commission)​. Though roles with complex, long sales cycles may use a higher base (e.g. 70/30) to ensure stability​.

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Another structure is straight commission (commission-only), where the person’s entire earnings come from sales results. If they sell nothing in a period, they earn nothing, but there’s usually no cap on upside.

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For instance, a commission-only plan might pay a salesperson 3% of each subscription sold; if they sell no subscriptions that month, their pay is $0​. Commission-only arrangements can be highly motivating for driven sellers and cost-effective for companies (pay is only incurred when revenue is generated)​, but they carry more risk and income volatility for employees​.

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Variations include tiered commissions (higher rates once certain targets are surpassed) and draws against commission (a recoverable advance to provide some income stability).

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Here are a few industry-specific examples for reference:

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• A SaaS sales representative might be on a 70/30 plan, with an expected total yearly earning of $100,000 ($70,000 is base salary and $30,000 through commissions). If the rep exceeds their quota, the commission portion can grow (sometimes with accelerators, e.g., 15% commission rate after 100% of target).

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• In real estate, a realtor could earn 3% of each home sale they close. So on a $300,000 house, the commission is $9,000 (often split between buyer’s and seller’s agents).

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• A freelance sales agent sells advertising spots for a media company with a commission of 15% of sales. If they sell $10,000 worth of ads in a month, they take home $1,500, but if they sell nothing, they earn $0 that month.

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• In a retail store, an associate might have an hourly wage plus a small commission (like 2% of their personal sales) as a perk for upselling customers. If they sell $5,000 in merchandise in a week, they get an extra $100.

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Commission-Based Compensation Plan Template

A well-structured spreadsheet template streamlines commission calculations. A basic version includes Employee Name, Sales Achieved, Quota, Commission Rate, and Commission Earned. 

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For more complex plans, formulas can incorporate tiered rates, accelerators, and thresholds, ensuring accurate payouts.

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If your commission structure includes multiple products or services with varying rates, the template can track sales by category and sum total earnings accordingly. For long sales cycles, you may need columns for Collected vs. Sold Amount, adjusting payouts based on received revenue rather than closed deals. Testing with sample data ensures accuracy.

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Advanced templates can include year-to-date tracking, showing quarterly accruals, and summaries of total earnings (base + commission) alongside company-wide commission expenses for budgeting.

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Beyond spreadsheets, a Word document can outline the commission policy, detailing eligibility, calculation methods, payment frequency (e.g., monthly or quarterly, with adjustments for returns or non-payment), and example scenarios for clarity.

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Here are some additional customization tips:

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• If operating in sales tiers (small, mid, enterprise deals), integrate separate commission rates.

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• For team-based structures, aggregate sales figures and split commissions accordingly.

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• Account for caps and floors, ensuring payout aligns with plan rules.

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• If offering draws against future commissions, incorporate deductions in the template.

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• Lock formula cells to prevent edits and highlight input fields for ease of use.

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Bonus Structure Examples

Bonus structures provide additional compensation on top of base pay when specific criteria or goals are met. Unlike commissions (usually tied to individual sales transactions), bonuses can reward a wide range of achievements, from individual performance to team outcomes or company success. In essence, a bonus is “over and above” pay that an employee earns for hitting predefined performance metrics or milestones​.

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Bonus plans can be short-term (like a quarterly performance bonus) or annual, and they may be guaranteed if targets are hit (formula-driven) or discretionary based on management evaluation. 

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Common types of bonuses include performance bonuses (tied to performance reviews or achievement of objectives), profit-sharing bonuses (employees get a share of company profits if certain profit targets are achieved), signing bonuses (one-time bonus for joining a company, often in competitive hiring situations), referral bonuses (reward for referring a successful hire), retention bonuses (to encourage key staff to stay through a critical period), and spot bonuses (immediate awards for exceptional effort on a project).

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The structure of a bonus plan outlines who is eligible and how the bonus is calculated or determined. For example, a company might have a policy that all employees are eligible for an annual bonus up to 10% of their salary based on a mix of company financial results and individual performance rating.

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Bonuses are prevalent in many industries as part of total compensation:

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• In corporate sectors like finance, consulting, or technology, annual performance bonuses are expected. For example, an investment banking analyst might receive a year-end bonus that is 20% of their base salary if the firm and the individual performed well.

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• In manufacturing or retail, companies may use profit-sharing bonuses. For instance, a manufacturing company could distribute 5% of annual profits to employees based on hours worked or tenure (aligning everyone with the company’s success).

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• Notably, some airlines and large retailers share profits. Southwest Airlines historically allocates a portion of profits to employees (10% of profits to retirement funds plus additional cash incentives)​.

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Bonus Plan Template 

To manage a bonus program, you might use two types of templates:

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1. Bonus Policy Template (Word/Docs)

A written template to outline the bonus structure and criteria. This document should include sections like Eligibility (which employees or departments participate), Performance Measures (what metrics or results trigger the bonus), Calculation (how the bonus amount is determined), Timing (e.g., bonuses paid quarterly, annually, or upon project completion), and Payout Process (any conditions, such as still being employed on payout date, or clawback provisions if applicable). 

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2. Bonus Calculation Template (Excel/Sheets) This spreadsheet helps calculate individual bonuses once performance results are in. It could list all employees (or at least those eligible) and include columns for relevant inputs like Base Salary, Target Bonus %, Performance Rating or Metric Result, and then Bonus Earned. For instance, in an annual performance bonus sheet you might have:

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If the bonus depends on a company result, include that as an input. For example, “Company Performance Multiplier” might be 1.1 if above target, or 0.8 if below, applied to everyone’s payout.

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For team-based bonuses, you might group employees by team and have an input for each team’s achievement.

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For profit-sharing, the sheet could have the total profit figure and compute each person’s share based on a formula.

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Here are some additional customization considerations:

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• Tailor the calculation fields to your bonus formula. If you use multiple criteria (say 50% based on company result, 50% on individual performance), the sheet can allocate two columns for each portion and sum them for the final bonus.

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• Define the metrics that matter. For example, a call center might include a quality score or average handle time as a metric for bonuses.

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• If your bonus is discretionary, the “calculation” template can still help by listing recommended or last year’s amounts. You might also include a column for manager’s recommended bonus and final approved bonus.

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• You can customize the templates over time. For example, if you introduce a new bonus type like a referral bonus, create a section in the policy and a tab in the spreadsheet to track referrals and payouts.

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• Keep records year over year; it will help in evaluating if the bonus structure is meeting its goals (e.g., if performance improved after introducing the bonus).

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• Clearly communicate the bonus plan to employees using the policy document, so they understand how they can earn rewards. A transparent bonus plan, backed by solid templates for execution, will boost trust and morale by showing employees exactly how extra pay is earned.

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Equity Compensation Examples

Equity compensation is a form of non-cash pay that gives employees an ownership stake (or potential stake) in the company. Instead of (or in addition to) immediate cash salary, employees receive shares of stock or the right to purchase shares in the future at a favorable price​.

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Common types of equity compensation include stock options, restricted stock units (RSUs), employee stock purchase plans (ESPP), stock appreciation rights (SARs), and even phantom stock in some cases​.

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The idea is to align employees’ interests with the company’s success. Of the company’s value grows, the equity becomes more valuable, creating a potential large reward for the employee. For employers, offering equity can help attract and retain talent (especially in startups or growth companies where cash may be limited)​.

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​Equity comp usually comes with conditions, primarily vesting periods. Vesting means the employee must remain with the company for a certain period (or until certain milestones) before they fully own the shares or can exercise the stock options. A very common vesting schedule in startups is four years with a one-year “cliff,” typically 25% of the equity vests after one year, and the remainder vests gradually (e.g. monthly or quarterly) over the next three years​.

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Here’s a detailed look at different types of equity plans:

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• Stock Options: These give the employee the option to buy shares at a fixed “exercise” price (often the market value at the time of grant) after vesting​. If the company’s stock price rises above the exercise price, the options have value (the employee can buy low and potentially sell high). For example, an employee might get 10,000 stock options with an exercise price of $5 per share; if after 4 years of vesting the stock is $15, the employee can exercise at $5 and sell at $15 (net $10 profit per share, before taxes). If the stock stays below $5, the options are “underwater” and not beneficial to exercise.

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• Restricted Stock Units (RSUs): RSUs are a promise to deliver actual shares once certain conditions (usually time-based vesting) are met​. Unlike options, RSUs don’t require purchase. The employee gets the shares outright at vesting (or the company issues the equivalent cash value, depending on the plan). For instance, a senior manager might be granted 1,000 RSUs that vest over 4 years, meaning 250 shares delivered each year if the person is still employed. If the stock is $20 at vesting, those 250 shares are worth $5,000 at that moment. RSUs always have some value as long as the stock price is above $0, whereas options only have value if the stock price exceeds the grant price.

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• ESPP (Employee Stock Purchase Plan): This is typically a broad-based program allowing employees to buy company stock at a discount (often 10-15% off the market price) through payroll deductions. It’s a way for employees to invest in the company with an immediate gain (the discount) and potential upside. ESPPs usually aren’t “grants” like options/RSUs, but a benefit program. However, they are part of equity compensation strategy in many public companies​.
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• Others: Some companies, especially startups, might use phantom stock or SARs which grant a cash bonus equal to the value of a certain number of shares (to avoid actually issuing stock but still reward like equity). Performance shares are another form, where stock or units are granted only if specific performance conditions (like hitting financial targets) are achieved. These tend to be for executives or special incentive programs.

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Equity Compensation Template

Managing equity grants can be complex, so a structured template helps both the employer (HR/finance) and the employee understand the details. Here are a couple of template ideas:

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1. Employee-Facing Equity Grant Summary (Word/Docs or PDF)

A template for an equity grant notice or summary that you can fill in for each grant. It would include fields like: Grant Date, Type of Grant (ISO, NSO, RSU, etc.), Number of Shares/Options Granted, Exercise Price (if options), Vesting Schedule (e.g., “25% on 1/1/2026, then 1/48th monthly thereafter”), Vesting Start Date, Expiration Date (for options, typically 10 years from grant, or 90 days post-termination), and perhaps Current Fair Market Value at grant for reference.

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This template ensures all key info is communicated. For customization, adjust it to your equity type–an RSU grant might not have an exercise price or expiration, so the template can toggle those fields. If using performance-vested shares, include the performance conditions in the template.

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2. Equity Vesting Schedule (Excel/Sheets)

A spreadsheet template that tracks vesting over time. This is useful for both HR and employees to model “when do my shares vest and what could they be worth?”

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For example, have columns for Date, Shares Vesting on that Date, Cumulative Vested Shares, and you might include a column for an assumed stock price to calculate Projected Value. A simple version could list each vest date (monthly or yearly as needed).

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For a four-year monthly vesting, the sheet would list 48 months with the number of options vesting each month. You can incorporate formulas: e.g., total granted in one cell, then fill down the vesting increment per period. If cliffs are involved, the first vest date (12-month mark) would have the large chunk, then subsequent ones smaller. The template can also help track multiple grants by having each grant on a separate tab or a combined schedule on one tab (with columns identifying grant ID or date). For example, a vesting schedule section might look like:

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In this hypothetical, you could see how value at vesting changes with stock price. This is more for personal planning.

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From the company side, they might maintain a similar sheet for all employees to forecast share dilution and expense, but that’s more complex (often handled by cap table software). For a small business just starting with equity, a Google Sheet can be used to track who has what options.

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Here are additional customization tips:

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• Equity templates should be customized to the specific plan rules of your company. If you have multiple equity types, you may need different templates or combined ones. For instance, an employee might have both stock options and RSUs; you could create a dashboard sheet for the employee that lists all their grants, their vesting status, and total potential value. Include a notes section for special conditions (like “Accelerated vesting: if company is acquired, 50% of unvested RSUs vest immediately”). Ensure formulas like total vested shares don’t go beyond the grant amount.

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• If your company does equity refresh grants (periodic new grants), you might use a template to plan those. For example, a sheet to calculate how many new options to grant an employee so that their total equity stays at a certain value each year.

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• Another important customization is incorporating tax considerations. Some templates might include a column to estimate tax withholding for RSUs or the Alternative Minimum Tax impact for Incentive Stock Options (though those can get complex, so often separate tools are used). Or, simply note the tax rate for withholding on RSUs (e.g., 22%) in the document so employees know to set aside that portion.

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• For communications, you might also use a slide or infographic to explain equity to employees. This could be another “template” of sorts (educational material). For example, a one-pager that explains how exercising options works, or the timeline of vesting in visual form. Tailor any explanatory content to the sophistication of your audience; new hires in a startup might need more basics on what stock options mean, while veterans of big firms might just need specifics of your plan.

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Using PerformYard for Compensation Planning

PerformYard is performance management software that can also assist with compensation planning by linking performance data with pay decisions. It provides tools to manage salary ranges, track performance-based pay components, and administer bonuses in alignment with employee reviews.

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Below, we detail how to use PerformYard for setting up salary bands, integrating performance with pay (e.g., merit increases or commissions), and managing bonus distribution.

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1. Setting Up Salary Bands in PerformYard

PerformYard includes salary and pay grades management features that allow you to define salary ranges (bands) for roles and levels​.

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To use this, first analyze your job roles and determine appropriate pay grades or levels. In PerformYard, you can create data fields or categories for each employee’s pay grade and link it with a salary band (minimum, midpoint, maximum for that grade).

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For example, you might set Pay Grade 5 to correspond to a salary band of $70k–$90k for senior engineers.

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You can input these ranges into PerformYard’s system so that each role or employee can be tagged with the correct band. This helps in compensation planning and reviews. When managers are considering a raise or a new hire’s offer, they can easily reference the predefined band in the software.

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By centralizing salary band information, PerformYard makes it easier to maintain internal equity and transparency. HR can periodically update the bands (for inflation or market changes) in the system, and managers will always see the current approved range when they access an employee’s profile.

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2. Tracking Performance-Based Pay in PerformYard

One of PerformYard’s strengths is integrating performance evaluations with compensation decisions. Performance-based pay can include merit increases, bonuses, or commissions that depend on employee performance. PerformYard allows you to overlay compensation data with performance review scores​.

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For instance, as managers complete performance reviews in PerformYard, they can simultaneously view the employee’s current salary, past raises, and any performance-pay history. The platform’s “dual-view” feature lets managers see an employee’s compensation details side by side with their review feedback​.

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This means when deciding on a merit raise or recommending a bonus, the manager has all relevant data in one place: they might see that an employee is at the lower end of their salary band and a top performer, supporting a higher increase.

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PerformYard can store custom fields such as last merit increase date, percentage, and performance rating, which helps track trends over time. It can also generate reports that correlate performance ratings with compensation outcomes. For example, a report might show that all employees rated “Excellent” got between 4% and 6% raises, whereas “Meets Expectations” got 2% on average.

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3. Linking to Incentives

If your organization pays bonuses or commissions based on performance metrics, you can track those metrics in PerformYard’s goal tracking or OKR features and then use that data for compensation.

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For example, if a sales rep’s commission is tied to customer satisfaction ratings, you could track that rating as a goal in PerformYard. At period end, you’d have the data handy to calculate the commission. While PerformYard might not calculate the commission dollars for you (that might still be done in your payroll or a spreadsheet), it ensures the performance metrics that drive pay are visible and recorded. This tight integration drives a culture where performance and pay go hand-in-hand. Employees see that their reviews and goal achievements directly influence their compensation.

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4. Managing Bonuses with PerformYard

PerformYard can also help administer and track bonuses, ensuring they align with performance and are recorded properly. First, you can use custom data fields in PerformYard to log bonuses–for example, an “Annual Bonus 2024” field for the amount paid, or a “Bonus Eligibility” field indicating if an employee is in a bonus program. The platform allows adding data fields (from your HRIS or manually) such as bonus payouts, salary increases, and equity grants for each employee​.

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By storing this information, you build a historical record that can be referenced in future compensation cycles. For instance, before deciding this year’s bonus, a manager can see last year’s bonus for their team member in PerformYard (instead of searching emails or files).

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Crucially, PerformYard links these bonus records with performance data. As mentioned, managers can see review scores next to the bonus info, which helps justify decisions (e.g., if someone received the maximum bonus because they had an “outstanding” rating).

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You can also generate reports to see patterns, such as a list of all employees, their performance rating, and bonus amount–checking for fairness and consistency. Perhaps you find that all top performers got at least some bonus (which is good to reward excellence), or you might catch if someone with a high rating was accidentally left out. This kind of oversight is much easier when the data is together in one system.

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5. Scheduling Bonus Processes

If you run a formal bonus cycle (say yearly), you can use PerformYard to facilitate it.

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One approach is to conduct a “compensation review” cycle after performance reviews. In PerformYard, you could create a form or template for managers to input recommended bonus amounts for their direct reports. They would submit this through the system, possibly requiring alignment with the performance rating.

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HR can pre-fill some guidelines in the form (for example, “Eligible bonus range: 0 - 10% of salary, default target 5%”). Managers input their decisions, which then might go through an approval workflow (e.g., director or HR approves in PerformYard). After approval, the final bonus amounts can be exported to payroll. This way, the entire bonus decision process is documented in one place.

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Additionally, PerformYard can help with timing and communication of bonuses. It can remind managers of the timeline (“Q4 bonus recommendations due by X date”) and even notify employees once bonuses are finalized (if you choose to communicate through the platform). 

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Using the software’s scheduling, you ensure that performance reviews and bonus discussions happen in sync–no one is caught off guard or forgotten.

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Finally, with all bonus and compensation data in the system, you maintain compliance and consistency. You can easily pull a report for finance or leadership showing total bonuses awarded, or track metrics like percentage of employees receiving a bonus. If using equity, you could track how many equity grants were given out and to whom, ensuring diversity and equity in those rewards as well. All of this contributes to a more organized and fair compensation planning process.