Sales commission structures are one of those topics that sounds like a finance problem but is really a people problem. Get it wrong and you hire a rep who generates activity without generating revenue, or you pay out commissions that your margins cannot support, or you set expectations so vague that the relationship falls apart in month three. Getting it right means your sales support pays for itself and the rep has a reason to stay focused on your brand.
This guide covers how to design commission structures for early sales hires and independent contractors in CPG, what the common models actually look like, and how to set the terms so both sides know what winning looks like.
What Commission Rates Are Normal for CPG Sales Reps
Commission rates for independent CPG sales reps typically run between 5 and 15 percent of net sales, with the most common range sitting at 8 to 12 percent for food and beverage. The exact number depends on category, territory size, whether the rep is handling full-cycle selling or just introductions, and whether you are paying a base retainer on top of commission.
Pure commission structures (no base, no retainer) command higher rates because the rep is absorbing all the income risk. Hybrid structures (small base or monthly retainer plus commission) justify lower commission rates because you are reducing that risk. Splitting the difference is how most early-stage CPG brands start: a modest retainer ($500 to $1,500 per month) that keeps the rep engaged while you build momentum, combined with a commission rate in the 8 to 10 percent range.
Many independent CPG sales reps carry multiple brands simultaneously. A rep covering the natural grocery channel in the mid-Atlantic might represent eight to twelve brands at once. Your commission structure needs to give them a reason to prioritize your brand over the others in their portfolio. A slightly higher rate on new accounts opened in the first 90 days accomplishes this without permanently inflating your commission base.
For direct-to-retailer sales, 10 percent is a common starting point. This means if a rep opens a new account with a $500 monthly reorder, they are earning $50 per month on that account indefinitely (or for whatever duration your agreement specifies). Multiply that by twenty active accounts and the rep is earning $1,000 per month in residual income on existing business, which is exactly what keeps them motivated to maintain and grow those accounts.
For distributor-facing sales, rates are usually lower. When a rep is selling into a distributor rather than directly to a retailer, their role in the actual account relationship is more limited. Commission rates on distributor-placed business typically run 3 to 6 percent because the rep is not managing the end retail relationship. Some brands pay the full commission rate on initial distributor placement and a reduced rate on ongoing distributor volume.
Split Commission Structures and When They Make Sense
A split commission is exactly what it sounds like: the commission on a sale is divided between two parties, typically a regional rep and a house account, or between two reps who collaborated on a deal. Split commissions come up frequently in CPG when a national broker network is involved, when you have inside sales support and outside field reps, or when territory boundaries are unclear.
The classic split is 50/50 between the rep who opened the account and the person managing it ongoing. This is what founders often encounter when an independent rep says "I just want a split commission," meaning they are not asking for full ownership of the revenue stream. They are offering to share it with whoever at your company is managing the account day-to-day, or with another rep who handles a different function in the sale. This structure makes sense when the rep is genuinely contributing to opening doors but your team is handling follow-through, onboarding, and relationship management after the initial sale.
Split commissions can create ambiguity about who owns the account. If two people share commission on the same account, both may feel partially responsible for it, which sometimes means neither feels fully responsible. Clarify in your agreements exactly who does what: which party is responsible for the reorder relationship, who handles complaints or out-of-stocks, and who the buyer calls when something goes wrong. The commission split can be clean even when the responsibilities are clearly divided.
Using a split commission structure without defining what triggers the split. If your agreement says "50 percent to the referring rep on any account they introduce," but does not define what "introduce" means, you will have disputes. Does a LinkedIn connection count as an introduction? An email CC? A meeting the rep attended? Write it down before the first check clears.
When not to use a split structure. If your rep is doing full-cycle selling (identifying prospects, making contact, pitching, closing, and managing the ongoing relationship), a split does not make sense. Pay the full commission rate and let them own the account. Splitting in that scenario is just paying less for the same work. Reps know the difference and the ones worth keeping will not stick around for it.
Tiered Commission Rates and How to Structure Them
Tiered commission structures pay a higher rate above certain volume thresholds. The idea is to reward reps who outperform without paying premium rates on baseline business.
A simple tiered structure might look like this: 8 percent commission on the first $5,000 in monthly net sales, 10 percent on monthly net sales between $5,000 and $15,000, and 12 percent on everything above $15,000. This creates a clear incentive to push through each threshold and rewards reps who grow their territory aggressively.
Tiered structures work best when your rep has genuine control over volume. If account reorders are mostly driven by product sell-through that neither you nor your rep can meaningfully influence, tiering based on total volume is less effective. In that case, consider tiering on number of new accounts opened per quarter instead. New account acquisition is something a good rep can directly affect. Reorder volume on existing accounts is harder to move without a price promotion or new product launch.
Annual resets vs. rolling calculations. Tiered commissions need a reset cadence. If thresholds reset annually on January 1, your rep is incentivized to push volume hard in Q4 to hit the top tier and then coasts in January. Monthly resets create more consistent incentive throughout the year. Rolling 90-day calculations smooth out seasonal swings and give reps a fair window to show what they can do.
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See How It WorksInclude a new account bonus on top of the commission rate. A flat $50 to $150 bonus per new account opened and receiving a first purchase order is a simple addition to any commission structure that rewards the hardest part of the job: getting a brand new account to say yes for the first time. This bonus pays out once per account and is separate from the ongoing commission rate on that account's reorders. New account bonuses are especially useful in the first six months of a rep relationship when you need momentum fast.
Independent Contractor Agreements for Sales Reps
Most early CPG sales reps are paid as independent contractors, not employees. This is common and appropriate when the rep is working for multiple brands, setting their own schedule, and operating as their own business entity. It becomes a legal problem when you treat an IC like an employee (dictating hours, requiring exclusivity, providing equipment) without going through proper classification.
The basics every IC agreement needs. Territory definition (geographic region, account list, or both). Commission rate and structure, written out explicitly with examples. Payment timing (net-30 from invoice date is standard; some brands pay monthly on the prior month's shipped and collected revenue). Term and termination provisions (both sides should be able to exit with 30 days notice). Account ownership: if the rep relationship ends, who owns the accounts they opened? Most founders want those accounts to revert to the brand.
Exclusivity clauses are common but negotiable. A category exclusivity clause says the rep cannot represent a direct competitor in the same category during the term of your agreement. This is reasonable and most reps expect it. Asking for full industry exclusivity (no other food and beverage brands) is not reasonable for a pure commission or low-retainer structure. You cannot pay someone $800 a month and expect them to turn down all other business.
The best IC agreement I ever signed had three pages and took twenty minutes to read. It was clear about the territory, the rate, who owned the accounts, and how we would handle a split. We worked together for four years and never had a dispute.
Payment terms and expense reimbursement. Decide upfront whether you reimburse expenses. Many independent reps absorb their own travel, samples, and demo costs because they spread those costs across their brand portfolio. If you are asking a rep to travel to a market specifically for your brand, reimbursing direct expenses is reasonable. If you want them to run demos, either provide demo product at no charge or pay a demo fee separate from the commission structure. Do not ask reps to absorb demo costs out of their commission.
What happens when an account goes through a distributor mid-relationship. This situation comes up constantly. Your rep opens an independent retailer account. Six months later, that retailer starts buying through a distributor to simplify their ordering. The rep's commission should still apply to that account's volume, now flowing through the distributor. Write this explicitly into your agreement so there is no dispute when the purchasing method changes.
Setting Performance Expectations and Metrics
A commission structure without performance expectations is just a payment schedule. The rep needs to know what good looks like, what the minimum bar is, and how you will measure whether the relationship is working.
Set a minimum account acquisition target for the first 90 days. This is the clearest early signal of whether a rep is a fit for your brand. Reasonable targets depend on territory and category, but for an independent rep with an active network in a single metro area, opening three to five new accounts in the first 90 days is achievable and worth setting as a minimum expectation. If a rep has not opened a single new account in 60 days, that is a conversation to have before month three.
Track both new account acquisition and reorder rate. Opening accounts is meaningless if they do not reorder. A rep who opens ten accounts in a quarter but only two of them reorder is selling something that the product cannot sustain. Track reorder rate by rep as a metric separate from total accounts opened. Healthy reorder rates in indie retail are 60 to 80 percent of first-order accounts placing a second order within 90 days.
Your commission structure is a communication tool. It tells your rep exactly where you want them to spend their time. If you pay only on new accounts, you will get reps who chase new accounts and neglect existing ones. If you pay only on total volume, you will get reps who focus on big accounts and ignore smaller ones with high growth potential. Structure the incentives to match the behavior you actually want.
Review the relationship quarterly, not annually. Quarterly check-ins give both sides a chance to adjust territory, expectations, and rate structure as the business evolves. An annual review is too infrequent to catch problems early. In the review, look at: number of new accounts opened, reorder rate on existing accounts, gross revenue generated, quality of relationships with key buyers, and any market intelligence the rep has surfaced. That last one is undervalued. A rep in the field hears things you do not: what competing brands are doing, which stores are changing buyers, where there is shelf space opening up.
Be clear about when commission stops. If a rep leaves your program, how long do they continue to earn commission on the accounts they opened? Thirty days is common. Ninety days is more generous and appropriate when the rep has deeply established accounts that will clearly reorder based on their relationship. Anything longer than six months is hard to administer and creates accounting complexity. Define the tail period in the agreement and enforce it consistently.
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See How It WorksSales commission structures are not complicated once you understand what behavior you are trying to incentivize. Pay for the outcomes you want, define the terms precisely, and review the relationship regularly enough to catch problems before they become expensive. The brands that build strong independent sales teams are the ones who treat their reps as partners, pay them fairly, and give them a product and a story worth selling.