Bonus payout curve explained (with formula)
For a full walkthrough that connects attainment, payout curves, formulas, and worked examples, read How sales bonuses are calculated.
What is a payout curve?
A payout curve is the rule that converts attainment (e.g., 85% of quota) into a bonus payout (e.g., 60% of target bonus). Most plans define a few anchor points—like a threshold, target, and sometimes a cap—and then apply a slope between those points.
The simplest formula
One common approach is a piece‑wise function:
- Below threshold: payout = 0
- Threshold → target: payout increases at a base slope
- Above target: payout increases at an accelerated slope
- Optional cap: payout stops increasing above a maximum
Worked example
Assume:
- Quota: £100,000
- Threshold: 70% attainment
- Target bonus: £10,000 at 100%
- Accelerator: 2× payout rate above 100%
- Cap: 200% payout (max £20,000)
Scenario A: 85% attainment (£85,000). You are above threshold but below target, so payout is on the base slope. A typical implementation pays a proportional share between 70% and 100% attainment (the exact slope differs by company). For example, 85% is halfway between 70% and 100%, so payout could be roughly ~50% of target bonus → ~£5,000.
Scenario B: 120% attainment (£120,000). You reach target, so you earn the full £10,000, then the extra 20% uses the accelerated slope. If the accelerator doubles the rate above 100%, the additional payout could be about 40% of target (20% × 2) → ~£4,000, total ~£14,000 (still under the cap).
Common curve shapes
- Linear: payout rises evenly with attainment.
- Threshold + linear: zero below threshold, then linear.
- Accelerated: higher slope above 100% (motivates over‑performance).
- Stepped: payouts at discrete bands (simple, but can create “cliff” behaviour).
Pitfalls to avoid
- Unclear attainment definition (bookings vs revenue vs margin).
- Hidden caps or retroactive caps applied after the fact.
- Cliffs that create gaming behaviour near thresholds.
- Missing proration rules for partial periods.