How to use the commission calculator
- Pick Flat rate, Tiered rates or Sales needed for a target commission.
- For a flat rate, enter sales and the commission percent.
- For tiers, add each band as an "up to" amount and a rate. Leave the last tier's limit blank for no limit.
- Add base pay in More options to see total pay.
Formula
Flat: commission = sales x rate
Tiered: commission = sum over tiers of (sales inside the tier) x (that tier's rate)
Target: sales needed = target commission / rate
Tiered commission here is marginal, like tax brackets: each rate applies only to the sales inside its band, not to all sales.
Worked example: three tiers
Sales are $85,000. Tiers: 3 percent up to $25,000, 5 percent from $25,000 to $75,000 and 8 percent above $75,000.
Tier 1: $25,000 x 3% = $750. Tier 2: $50,000 x 5% = $2,500. Tier 3: $10,000 x 8% = $800. Total commission: $4,050, an effective rate of 4.76 percent.
A flat 5 percent on the same sales would pay $4,250. To earn $6,000 at 5 percent you need $120,000 in sales.
Marginal versus retroactive tiers
Some plans pay the higher rate on all sales once a threshold is hit (retroactive or "cliff" tiers). That is not what this tool calculates. If your plan works that way, run it as a flat rate at the rate that applies to your total.
Checking a commission statement
Compare three numbers: the sales base your employer used, the rate or tier applied and the total. If the base is lower than your records, ask whether returns, discounts or split credit were subtracted. If the rate looks off, ask which plan year or tier schedule applies. Keep your own record of deals so you can reconcile each period.
Assumptions and limits
- Plan terms such as caps, draws, clawbacks, splits and accelerators are not modeled.
- Sales amounts are treated as already net of returns.
- Commission is gross pay before taxes. Supplemental wage withholding rules differ from regular pay.
Frequently asked questions
How do I calculate commission?
Multiply sales by the commission rate. $50,000 at 4 percent is $2,000.
What does an effective rate mean?
It is total commission divided by total sales. With tiers it falls between the lowest and highest tier rates.
Can commission count toward overtime?
Commissions are usually part of the regular rate under federal rules, which can increase overtime pay for non-exempt employees. The overtime calculator handles weekly bonuses.
What is the difference between commission and a draw?
A draw is an advance against future commission. If your commission is lower than the draw, you may owe the difference or carry a balance, depending on your agreement. This calculator does not model draws.