How to use the sales commission tier calculator
- Enter the sales quota for the period and the sales achieved.
- Choose how the tiers apply: Each tier on its slice pays each rate only on the sales inside that tier, while Top tier on all sales pays the highest tier you reached on every dollar.
- Set the tiers. Each one starts at a percent of quota and pays a rate. Tiers must start at higher and higher percents.
- Read the commission, your quota attainment and the table showing how much each tier paid.
Formula
Quota attainment = sales / quota x 100%
Slice method: commission = sum of (sales inside each band x that band's rate)
Top tier method: commission = sales x rate of the highest tier reached
Band start in dollars = quota x tier start % / 100
Sales below the first tier's starting percent earn nothing. The last tier has no upper limit.
A rep who reached 120% of a $100,000 quota
The tiers are 4% from 0% of quota, 6% from 100% and 8% from 150%. With $120,000 of sales, the first $100,000 pays 4%, which is $4,000. The next $20,000 sits in the 100% to 150% band and pays 6%, which is $1,200. The commission is $5,200, an effective rate of 4.33%.
If the plan paid the top tier reached on all sales, the whole $120,000 would earn 6%, or $7,200. At $160,000 of sales the slice method pays $4,000 + $3,000 + $800 = $7,800, while the top tier method pays 8% of $160,000, which is $12,800.
Slices versus all sales
Plans that raise the rate once you pass quota are common, and they work in two ways. In the slice method, which is also called marginal, only the sales above a threshold earn the higher rate. In the retroactive method, reaching a tier raises the rate on all sales, which makes the jump at each threshold large.
The two methods give the same commission below the first threshold and very different amounts above it, so read your plan document to see which one it describes.
What this tool leaves out
Real plans include caps, draws, minimum quotas, product-specific rates, team splits, clawbacks and timing rules for when commission is paid. None of that is modeled here. The tiers and rates are only the numbers you enter, and the example values on the page are not typical of any plan.
For a single flat rate or to find the sales needed for a target commission, use the commission calculator. To see how much you must sell for an income goal, try the sales goal calculator, and to see commission inside total pay the gross pay calculator.
Assumptions and limits
- Tier starting points are percents of quota, listed from lowest to highest.
- The slice method applies each rate only to sales between its starting point and the next one.
- Sales below the first tier's starting point earn zero.
- Base pay, caps, draws, clawbacks, splits and taxes are not modeled.
Frequently asked questions
How is sales commission calculated with tiers?
Convert each tier's starting percent of quota into dollars, then pay each tier's rate on the sales that fall inside its band. Add the results. Some plans instead pay the highest tier's rate on all sales.
What is quota attainment?
It is sales divided by quota, shown as a percent. If your quota is $100,000 and you sold $120,000, your attainment is 120 percent.
What is a commission accelerator?
It is a higher rate that applies after you pass a threshold, usually quota. In the example, sales past 100 percent of quota earn 6 percent instead of 4 percent.
Why is my pay stub different from this result?
Plans often have details this tool does not model, such as caps, draws, splits and the timing of payment, and payroll withholds taxes. Check your written plan or ask payroll.