Commission Calculator
Compute sales commissions based on revenue, commission rate, and tiered structures to forecast earnings and plan compensation
Formula
Commission = Sales × Rate
Simple commission multiplies sales by rate. Tiered structures apply different rates to different sales levels.
Worked Examples
Example 1: Simple Commission
Problem:Sell $75,000, earn 6% commission.
Solution:Commission = $75,000 × 0.06 Commission = $4,500 With $3,000 base salary: Total = $3,000 + $4,500 = $7,500
Result:$4,500 commission, $7,500 total
Example 2: Tiered Commission
Problem:$80,000 sales with 3%/5%/7% tiers at $25K/$50K.
Solution:First $25K at 3%: $750 $25K-$50K at 5%: $1,250 $50K-$80K at 7%: $2,100 Total: $4,100 Effective rate: 5.125%
Result:$4,100 (5.125% effective)
Example 3: Real Estate Split
Problem:Sell $500,000 home, 3% commission, 70/30 split with broker.
Solution:Total commission: $15,000 Agent share (70%): $10,500 Broker share (30%): $4,500 Agent takes home $10,500.
Result:Agent earns $10,500
Frequently Asked Questions
How is sales commission calculated?
Simple commission: Sale Amount × Commission Rate. For $50,000 sale at 5%: $50,000 × 0.05 = $2,500. Tiered structures apply different rates to different sales levels.
What is a tiered commission structure?
Different rates apply to different sales levels. Example: 3% on first $25K, 5% on $25-50K, 7% on $50K+. Motivates higher sales with increasing rewards.
What is a typical sales commission rate?
Varies by industry: Real estate 2.5-3%, Insurance 5-20%, SaaS 8-12%, Retail 1-10%, Financial services 1-5%. Higher rates for higher-skill or longer sales cycles.
What is draw against commission?
An advance on future commissions. If you draw $3,000 but earn $2,000, you owe $1,000. Provides income stability but creates potential debt if sales are low.
How do commission caps work?
A maximum commission limit, either per sale or per period. Controversial—can demotivate top performers. Some companies use decelerators instead of hard caps.
What is base + commission vs straight commission?
Base + commission: guaranteed salary plus commission. More stability, lower commission rates. Straight commission: 100% commission, higher rates but no guaranteed income.
How are real estate commissions split?
Typically 5-6% total, split: 2.5-3% to listing agent's brokerage, 2.5-3% to buyer's agent. Agent then splits with their broker (often 70/30 to 50/50).
Are commissions taxed differently?
No—commissions are regular income. But they may be withheld at supplemental rate (22% federal). You'll reconcile at tax time. Self-employed pay self-employment tax.
What is OTE (On-Target Earnings)?
Expected total compensation when meeting sales quota. Example: $60K base + $60K OTE commission = $120K OTE. Actual earnings depend on performance.