How commission is calculated

Commission pay is usually a percentage of something: sales revenue, gross profit, margin, or sometimes a fixed amount per deal. This calculator focuses on the most common version: a commission rate applied to a sales amount (your "booked" sales for a pay period).

The simplest plan is a flat commission rate: Commission = Sales × (Commission Rate ÷ 100). If you sold $25,000 and your rate is 8%, your commission is: $25,000 × 0.08 = $2,000.

In many teams, you don't keep 100% of the revenue credit. Maybe you split a deal with another rep, or you only get paid on a portion of the account. That's what the Split deal / payout % is for. Think of it as "the percent of commissionable sales you actually get paid on."

With split deals, we adjust the effective sales first: Commissionable Sales = Sales × (Split % ÷ 100). Then apply the commission plan to that commissionable sales amount. Example: $25,000 sales, 50% split → commissionable sales = $12,500.

Tiered plans reward higher performance by paying higher rates after certain thresholds. There are two common ways companies implement tiers:

• Progressive (most common): each tier's rate applies only to the slice in that tier. Example: 5% up to $10k, 8% from $10k–$25k, 12% above $25k.
• Retroactive: once you reach a tier, the higher rate applies to the entire sales amount. Example: if you hit $25k, you might get 12% on all $25k (not just the portion above $25k).

This calculator supports both because "tiered commission" can mean different things depending on the plan document. If you're not sure, choose Progressive—it matches the structure used in most modern comp plans.

Many roles include a base salary (or base pay) plus commission. Since commission is usually calculated per month or per pay period, the calculator lets you choose how your base pay is expressed: monthly, biweekly, weekly, or yearly. Internally, it converts your base into a monthly equivalent so the breakdown is consistent.

A draw is an advance on future commission. It's often used when commission is volatile. If your commission is below the draw, you may still be paid the draw but owe the difference in future periods. This calculator treats the draw as an offset to show a "net commission after draw" view:

• Net commission = max(0, commission − draw) (simple preview)

A commission cap is a maximum commission payout for the period. If a cap is set, the calculator applies: capped commission = min(commission, cap).

Real comp plans can be more complex (recoverable vs non-recoverable draws, chargebacks, quota attainment, accelerators, decelerators). This tool aims to be accurate for the standard "rate × sales" structure and provide a transparent estimate for comparisons.

Examples (flat & tiered)

You sell $25,000 in a month at 8%. You keep 100% of the deal. Base pay is $1,500/month. No draw, no cap, $250 bonus.

• Commission = 25,000 × 0.08 = $2,000
• Total earnings = base 1,500 + commission 2,000 + bonus 250 = $3,750
• Effective commission rate = 2,000 ÷ 25,000 = 8.0%

Same numbers, but you only keep 60% of the credit (team split). Commissionable sales = 25,000 × 0.60 = $15,000. Commission = 15,000 × 0.08 = $1,200. Your total earnings drop by $800 compared to keeping 100%.

Sales are $30,000. Tier plan: 5% up to $10k, 8% up to $25k, 12% above $25k.

• Tier 1: 10,000 × 0.05 = $500
• Tier 2: (25,000 − 10,000) = 15,000 × 0.08 = $1,200
• Tier 3: (30,000 − 25,000) = 5,000 × 0.12 = $600
• Total commission = 500 + 1,200 + 600 = $2,300
• Effective commission rate = 2,300 ÷ 30,000 = 7.67%

Same tiers, but retroactive: once you hit $25k, the highest tier rate applies to all sales. At $30k, you're in Tier 3 → 12% of all 30,000 = $3,600. That's why it's important to know which tier rule your company uses.

• Run a conservative sales amount (your 25th percentile month).
• Run an optimistic sales amount (your best month).
• Compare jobs by holding sales constant and swapping comp plans.
• Save results as "Scenario A / B / C" using the notes in your browser (or copy text to a doc).

How this calculator helps in real life

Commission is emotional because it's tied to performance and identity. A good calculator should reduce the stress by making the math obvious. Here are practical ways people use this tool:

• Negotiating: "If I'm expected to sell $X, what does that equal in pay?"
• Forecasting: "If I average $Y per month, what is my likely total compensation?"
• Comparing offers: "Higher base vs higher rate—what wins at my sales level?"
• Planning taxes: Use your estimate to plan withholding and estimated payments (especially if commission is spiky).
• Quota sanity check: If the plan requires you to exceed a realistic sales number to earn good money, you'll see it quickly.

If your plan pays on gross profit or margin instead of sales, you can still use this calculator by entering your profit amount as "sales amount." Just remember: the meaning is "commissionable base." You can even rename the field in your own mind: "commissionable dollars."

The effective commission rate is: Effective rate = Commission ÷ Sales. In a flat plan, it equals the commission rate (after splits/caps). In a tiered plan, it becomes a blended rate. This is the fastest "at a glance" number for comparing plans.

Commission Calculator FAQs

• What's the difference between a draw and base salary?

  Base salary is guaranteed pay. A draw is usually an advance against future commission. Some draws are recoverable (you "owe it back" via future commissions), others aren't. This calculator shows a simple net view: commission minus draw.

• Does this calculator include taxes?

  Not directly. Taxes depend on your location, withholding, and how your employer treats bonuses and commission. If you want a tax view, pair this with a tax calculator and your paycheck settings.

• My plan has accelerators after hitting quota. Is that tiered?

  Often, yes. Accelerators are essentially higher rates after thresholds. If your plan says "10% after quota," treat quota as a tier threshold. If it's retroactive (rare), choose the retroactive option.

• How do chargebacks and clawbacks affect commission?

  They reduce commission later if a deal falls through, cancels, refunds, or doesn't pay. To model it, you can run a lower sales number, or reduce your bonus field as a quick "risk buffer."

• Can recruiters use this?

  Yes—recruiting and staffing commissions often work like tiered rates or per-placement payouts. Use "sales amount" as your commissionable base for the period.

• What's a good commission rate?

  It depends on industry, margins, and base salary. Instead of chasing one rate, compare total earnings at realistic sales levels. That's what this tool is built for.