Are there any design principles you recommend I use to differentiate between existing products to new customers and new business/new products?

Generally a sales comp plan may pay differently for new products or new accounts in order to recognize a few typical characteristics of these sales:

1) They may take more time and effort on the part of the sales person, so should pay more as a percent of sales to make them worth that time investment

2) They may pull sales people out of a comfort zone, and so should be more attractive to help them focus on new behaviors

3) They may be more difficult from a goal/quota setting point of view, with little/no history to use as a basis, and so goals/productivity expectations may have serious accuracy challenges compared to the base business.

Here are the typical comp mechanics to recognize these challenges:

Characteristic of the sale: Takes more effort

Comp mechanics: Pay a slightly higher rate – 15% to 50% more than base business is about right, depending on the degree of difficulty

If the “more effort” is only a startup challenge, make it clear that in the future it will revert to a lower rate – so they have every incentive to get these sales going quickly (for new products); if it will always take more effort, the rate should probably not revert (new customers)

Characteristic of the sale: New / out of comfort zone

Comp mechanics: Pay a higher rate on the new stuff and a lower rate on the old stuff – to provide “carrots” and “sticks” – so ignoring the new stuff would mean less earnings than last year for the same results as last year; and meeting expectations on both old and new would result in slightly higher earnings

Again, make it clear that rates will not stay this high on the new stuff forever, so it will be in the sales person’s best interest to get a fast start

Characteristic of the sale: Difficult to set goals

Comp mechanics: Pay on the new stuff (products/customers) from first dollar, without a lot of dramatic acceleration or bonuses around quota/productivity expectation. If you know your goals are rough, don’t make attainment of them a high-stakes event for the company or the sales person. In fact, a straight commission (at an attractive rate) without any acceleration is a reasonable arrangement in the first year.

What type of itemization/documentation is an employer required to provide to sales people paid variable compensation?

There is no requirement to provide documentation in this country (US). You are free to provide additional compensation whenever you’d like, based on whatever criteria you establish (or change). However, to maximize the motivational value of your plans, it is a good idea for both the employer and the employee to see the plans as a serious commitment by the company, and to have a written document showing exactly how it will work (measures, amounts, frequency, handling of disputes, eligibility, etc.). If you have such a document, that is in the form of a legally binding plan document, then you will also need to protect the company with language about management discretion, employee termination, when an amount is considered earned, etc. And you will probably want to run it by your legal counsel.

There are companies that successfully manage their sales forces without written plan documents. Typically their plans are very straightforward, and they don’t have very large sales forces. But the norm (and the best practice in most instances) is to have a good plan document that makes the “rules of the game” clear and serves as a helpful reference for all involved.