Commission Calculator
Commission plans are designed to be motivating, which often means they are complicated. This calculator computes commission from sales value and rate, and the notes cover the structures that most often catch people out: tiered rates, draws against commission, and commission paid on margin rather than revenue.
Inputs
Result
7,500
How the commission calculator works
Flat commission = sales × rate. Total earnings = base salary + commission.
Tiered plans apply different rates to different bands of sales, so each tier is computed separately and summed — the same slab logic as income tax.
Margin-based plans pay on gross profit rather than revenue: commission = (revenue − cost) × rate, which is why discounting hits a salesperson's pay twice.
Worked example: tiered plan on 320,000 of sales
- First 100,000 at 2%: 2,000.
- Next 100,000 at 3%: 3,000.
- Remaining 120,000 at 5%: 6,000.
- Total commission: 11,000. With a 40,000 base, quarterly earnings are 51,000.
- A flat 3% on the same sales would have paid 9,600 — the tiers are worth 1,400.
Common mistakes to avoid
Applying the top tier rate to all sales
Tiered plans are marginal, not retroactive. Reaching the 5% band pays 5% only on sales above the threshold, unless the plan explicitly says otherwise.
Forgetting a draw is a loan
A recoverable draw is advanced against future commission and must be repaid from it. A strong month can produce a smaller cheque than expected.
Ignoring clawbacks and chargebacks
Refunds, cancellations and unpaid invoices commonly reverse commission months later. Model realistic net sales, not booked sales.
Frequently asked questions
How do I calculate commission on sales?
Multiply net sales by the commission rate. On 85,000 at 4%, commission is 3,400.
What is a draw against commission?
A guaranteed advance that is later deducted from earned commission. Recoverable draws must be repaid; non-recoverable ones do not.
Is it better to be paid on revenue or margin?
Revenue plans pay more when you discount; margin plans pay more when you hold price. Margin plans align you with the business but require price authority.
How does an accelerator work?
Above quota, the rate increases — for example 4% to quota and 7% beyond, which is why the last month of a quarter matters so much.
Is commission taxed differently?
It is ordinary income. It may be withheld at a flat supplemental rate initially, but the annual liability follows your normal brackets.
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