Alarm & security sales commission: how to pay on RMR, not just the install

Most home services verticals pay commission on one number: the job. A roofer closes a $14,000 re-roof, gets a cut of $14,000. Alarm and home security doesn’t work that way, and a comp plan that treats it like it does is paying reps to chase the wrong thing.

The install is often thin margin, sometimes close to break-even. The real money is the RMR— recurring monthly revenue — the monitoring fee that keeps paying long after the install truck leaves. A comp plan built around the one-time sale price, instead of the monthly contract it creates, is the single most common mistake in this vertical.

What actually gets paid: RMR, not the install

In alarm and security, a rep’s job isn’t really “sell the system.” It’s “sell the monitoring contract that the system makes possible.” Commission plans that pay well on RMR and thin on hardware get that alignment right. Plans that pay flat on total deal size — hardware and monitoring treated the same — push reps toward whichever closes fastest, which is usually the equipment upsell, not the long-term contract that actually funds the business.

The industry convention that shows up repeatedly: pay a meaningfully higher rate on RMR than on install/hardware, and layer milestone accelerators on top. One documented example — hit $50,000 in new RMR sold, and every commission for the rest of the period pays at 1.5x. The exact multiple varies by company, but the shape is consistent: RMR is the metric the accelerator is built around, not total contract value.

Self-generated leads pay more, and reps notice fast

A company-provided lead and a self-generated one aren’t the same unit of work, and paying them identically teaches reps to stop generating their own. Company leads are assigned essentially at random — system type, deal size, and how ready the prospect actually is to buy are out of the rep’s control. A self-generated lead is one the rep found, qualified, and controls end to end — which is why the California Alarm Association and others in the space treat self-gen as core to the job, not a bonus activity.

Signal: reps stop knocking doors and just wait on the lead queue. Fix:a real rate differential for self-generated business — if company-lead and self-gen commission look the same on the statement, that’s the behavior you’re actually incentivizing, regardless of what you tell reps in a meeting.

Why chargebacks matter more here than anywhere else

Every home services vertical deals with cancellations. Alarm and security deals with them on a different timeline and a different exposure. Monitoring customers have a federal right to cancel within 3 days of signing (FTC’s Cooling-Off Rule on door-to-door and in-home sales), and early cancellations in the first few months are common enough that the industry builds holdbacks around it by default: RMR commission is frequently held back at 10-15% against attrition for 12-24 months before it’s fully earned out.

The mechanism matters: without a clawback, a rep gets paid in full the moment a $45/month monitoring contract is signed. If that customer cancels in month two — inside the rescission window or shortly after — the company has paid a real commission on revenue that never showed up. Multiply that across a team and it’s not a rounding error, it’s a structural leak. A holdback or clawback window isn’t punitive; it’s the plan matching payout to revenue that actually materialized.

A starting structure

Not a template to copy exactly — every company’s install cost and monitoring margin are different — but the shape that shows up across the sourcing above:

• Base commission on RMR— a per-dollar or per-point rate on monthly monitoring revenue, meaningfully higher than the hardware/install rate.
• Thin or flat rate on hardware— enough to not actively discourage upsells, not so much that reps chase equipment over contract length.
• Self-generated multiplier— a real differential, not a token one, for business the rep sourced themselves.
• Milestone accelerator— a step-up (1.25-1.5x is the documented range) once a rep clears a set RMR threshold for the period.
• Holdback or clawback window— 10-15% held for 12-24 months against early cancellation, released as the contract proves out.

What to do next

If you’re resetting a plan around this, the mechanics above — RMR-weighted commission, self-gen multipliers, and clawback windows — are exactly the kind of structure that breaks a spreadsheet fast: multiple rates, a holdback that unwinds over 12-24 months, and per-rep tracking of what’s actually vested versus still at risk. If you’d rather see whether your current comp plan is sized for a tool built for your team, not an enterprise ops department, this checklist walks the five signals to check before you sign anything.