HVAC Sales Commission Rates & Processes That Work

In the HVAC industry, sales commissions serve two key purposes: 

1. They help incentivize certain behaviors from employees (generating sales, encouraging customer reviews, attendance, etc.)

2. They help companies retain top talent by offering competitive compensation.

As such, they’re important to any growing HVAC business.

However, managing and keeping track of different incentives and where each employee is earning them can get complicated for HVAC business owners and confusing for employees, especially if the company keeps tweaking commission structures. 

In this post, we cover typical commission rates and common challenges in managing commission structures. Then, we explain how ServiceTitan's HVAC software simplifies and automates the commission process, seamlessly integrating with job bidding and payroll to enhance workflow efficiency.

Table of Contents

• Typical HVAC sales commission rates

• The challenges of HVAC sales commission systems and how to solve them

• How ServiceTitan simplifies HVAC sales commission systems, saves time, and increases sales

Typical HVAC Sales Commission Rates: The Basics

Commission rates for HVAC technicians (and other related sales jobs like sales representatives and sales managers) in the United States vary widely depending on factors like company size, location, and the specific role and experience of the employee. 

Broadly speaking, commission rates are paid in addition to a base salary and the rate is based on experience and performance.

HVAC companies typically use several different commission structures, including:

1. Flat-Rate Commissions: Where the tech or salesperson receives a flat percentage of the sales amount. These are commonly used for experienced techs and sales staff who sell more big-ticket jobs (for example, installing an entire HVAC system). 

2. Tiered Commissions: Where the commission rate increases according to a higher band of sales. For example, 3% for sales up to $10,000, 5% for sales between $10,000 and $20,000, and so on.

3. Spiffs (Short-Term Incentives): Spiffs are one-time bonus payments for selling specific HVAC services such as maintenance agreements, or products, for example, $500 for a high-efficiency air conditioning unit. 

According to HVAC-Talk, commission rates generally range from 4% to 8% or higher, depending on the company structure and salesperson's experience. 

For flat-rate or tiered commission structures, rates can range from 2% to 12%.

The estimated total pay for an HVAC sales representative is $148,931 per year, with an average base salary of $86,346 per year, so it’s easy to see that commission rates and bonuses can make a significant difference to income.

How to Solve the Challenges of HVAC Sales Commission Systems

There are two key challenges of creating and running successful HVAC sales commission structures. 

• Challenge #1: HVAC sales commission systems are complicated for techs and sales staff to follow

• Challenge #2: HVAC commission structures are difficult for business owners to track & manage

Let’s discuss both.

Challenge #1: HVAC sales commission systems are complicated for techs and sales staff to follow

Commission structures can get complicated when HVAC business owners choose multiple behaviors to incentivize. As mentioned above, on top of base salary, they might reward sales numbers, customer reviews generated, attendance records, or follow-up best practices. 

This can be confusing for employees who may lose track of how, exactly, their bonus policies work or where they stand in earning commission for each activity. An employee who doesn’t quite understand their sales compensation plan isn’t going to be optimally motivated to pursue the sales goals and other targets that their employer had in mind. 

The other complication is that HVAC contractors repeatedly tweak their commission and bonus system to attract and/or retain top technician talent. A good full-time tech with years of experience is hard to find, and, once a contractor has a talented technician on their team, they want to do what they can to keep them. 

But this can have the same result: a commission plan that is complex and difficult to manage and keep track of. The practice can also create jealousy in the ranks. If the boss is making allowances, or changing policy for one employee, others might start wondering why they’re not being treated the same.

Solution #1: Simplify your commission structure by picking two KPIs

Explaining how commissions work should only take a couple of minutes, so it’s essential that contractors prioritize specifically what kind of performance they’re trying to encourage, and what motivates their employees. 

We recommend that HVAC contractors pick the two KPIs that are most important, rather than spreading themselves thin in an attempt to check every imaginable box. Most business owners have no trouble identifying their targets. More often than not it’s “efficiency” and “sales,” but preferences vary.

It’s also helpful to discuss with employees what motivates them. It’s not always cash. Some people might be better motivated by the opportunity to accrue more time off, or by being assigned job types that they especially like or that grow their skills.   

Challenge #2: HVAC commission structures are difficult for business owners to track & manage

The second challenge is that commission structures are typically difficult to track and manage. This is because many HVAC contractors tend to manage their commission systems separately (even if they use software to run other parts of their business), usually in an Excel spreadsheet. 

This means that every week, someone has to manually enter all relevant details from that week’s work history into the spreadsheet for each service technician, sales consultant, and other outside salesperson. It’s an incredibly time-consuming process prone to error, especially for shops with complicated commission systems.

Over time, errors in payroll calculations can lead to enormous financial and potentially legal headaches.

While using a spreadsheet might keep commissions relatively organized, they are at risk of being left out of bid calculations, resulting in costly estimating errors. If a contractor bids a job without factoring in the commission payment(s) related to that job, they’re certain to underbid and may even end up working at a loss.

If this becomes a pattern, it can quickly turn into a major issue.

Solution #2: Use a customizable & automated software solution

To help organize and manage their commission structures efficiently, HVAC contractors are increasingly turning to software solutions.

However, it’s virtually impossible to find two HVAC shops that handle commission pay identically, so it’s hard to find a software solution that’s well suited to the particular commission structure of a given shop.

So, when an HVAC contractor has more than a handful of employees—all of them with a range of skills and responsibilities—they need a software solution that’s comprehensive, dynamic, fully customizable, and painlessly automated. And the truth is that many of the software solutions on the market simply aren’t up to the task. 

With ServiceTitan, however, commissions can be accurately tracked and calculated every time, and commission systems are seamlessly integrated with job bidding and payroll processes. 

ServiceTitan helps HVAC shops reduce the time spent on payroll by 10 to 40 hours per week. 

Next, we’ll explain the benefits of using ServiceTitan for payroll & commission structures:

• Automated sales commissions that are configurable to your commission plans

• Integrated payroll management features that calculate your staff’s commission and pay seamlessly

• Digital sign-off for employees so your commission system is transparent

• KPI tracking that lets you monitor and analyze performance

• Accurate job bidding that always factors in your commission payments

How ServiceTitan Simplifies HVAC Sales Commission Systems, Saves Time & Increases Sales

Automated Sales Commissions

With ServiceTitan, HVAC contractors can cleanly integrate their commission structures into the rest of their business with a highly customizable and fully automated software system. 

With our software you can:

• Create individualized profiles for different kinds of employees — add any employee type you want, for example, technicians, HVAC sales representatives, HVAC installers, sales engineers, and HVAC service maintenance. 

• Include a description of each employee type’s incentive structure, which is color coded for easy reference.

Business owners (or sales managers) can then assign staff to appropriate Payroll Profiles, which include useful specs like their manager, geographical area, and base pay type (straight commission, hourly, piece work, etc.). This gives contractors the ability to ensure that all employees are paid a commission rate according to the same rules for that job title. They can also adjust parameters to apply to sub-groups of workers, or even to individual employees. 

With ServiceTitan you can choose from six configurable performance pay types (see illustration above) and configure commission calculations in any way you want. 

For example, costs (like materials and equipment) can be subtracted from the total price of a job before calculating commission, ensuring that employees are not collecting a percentage of overhead costs—like that pricey air conditioning system—and cutting into net profit.

Integrated Payroll Management

As well as accurately calculating the commission and bonus elements of payroll, ServiceTitan automates time tracking for every employee, incorporating flexible overtime and base salary. Business owners can efficiently mass-import thousands of existing payroll records, ensuring that they’re preserved, and that job costing is 100% accurate. 

Another convenient feature is that payroll reports can be generated based on not only the calculations that have been automated within ServiceTitan, but also on any external, imported data. 

Finally, contractors can easily extract and export gross pay data from ServiceTitan to their accounting software, for example QuickBooks or Sage Intacct.

Digital Sign-Off for Employees 

One drawback of a siloed and complex HVAC commission structure is that it can create a lack of transparency between employer and employee. Fostering transparency is particularly beneficial in the HVAC industry where competition for talented comfort advisors is fierce, and retaining the best ones is especially important. 

With ServiceTitan, HVAC employees can access a real-time view of their commissions from their cell phone. This allows them to track how they’re doing day to day and week to week, and highlight any discrepancies instantly. In addition, at the end of each pay period, staff can digitally sign off their timesheet to approve its accuracy with no need to waste time going into the office. 

This level of transparency gives techs and remote sales staff a hyper-clear view of their employer’s goals and instills trust that they are part of a cohesive team that’s working toward improving the bottom line.  

KPI Tracking That Feeds Into Commission Structures

With ServiceTitan you can connect your commission structures directly to the KPIs that drive them, and track them for individual employees.

For example, with our technician scorecard, you can track every tech’s stats, such as, number of calls per day, customer reviews received, estimates closed, revenue generated, memberships sold, and more. In general, our CSR scorecard also lets you monitor metrics for your customer service team, such as number of calls handled, conversions, etc. – even if they aren’t tied to a commission. 

Accurate Job Bidding & Estimates

ServiceTitan ensures that all elements of your commission structures are factored into your job bids so you won’t be in danger of providing quotes that are too low. 

HVAC businesses can set up a dynamic flat-rate pricebook that reflects your commission and bonus structure and that’s updated across all devices and systems so you and your sales team can build accurate estimates that bring in profit for every job. 

Using ServiceTitan Mobile, HVAC techs and sales representatives can create Good-Better-Best proposals that show customers high-quality images of all products, provide explainer videos and detailed product information on-site, and offer financing for big-ticket items. 

Once a customer selects their option, ServiceTitan connects the estimate to the rest of the HVAC workflow, including scheduling, dispatching, and billing. Then, when the work is underway, any commission rates that were included in the estimate will be reflected in the payroll connected to that specific job.

Simplify Your HVAC Sales Commission Structure with ServiceTitan

Many HVAC companies run overly complicated sales commission systems that confuse employees and are difficult to track and manage. 

Using fully customizable software like ServiceTitan that integrates with job bidding, payroll, and the rest of your business operations, simplifies and automates the commission process, saves you a ton of time, and makes the entire workflow significantly more efficient.