Commission Calculator
Commission Calculator
Sales commission on a flat rate or up to three tiers — paid on the whole sale at the tier reached, or slab by slab — with your base salary, total pay and the effective rate.
Commission
Sales of $5,00,000: 2% up to 2,00,000, 4% from 2,00,000, 6% from 4,00,000, paid slab by slab; base salary $25,000
Flat, whole-sale and slab-by-slab commission
- S
- sales in the period
- r0
- the base commission rate
- Tk, rk
- the threshold where tier k starts, and its rate; the last tier has no upper limit
Worked example
Sales of $5,00,000: 2% up to 2,00,000, 4% from 2,00,000, 6% from 4,00,000, paid slab by slab; base salary $25,000
First 2,00,000 at 2% = $4,000
Next 2,00,000 at 4% = $8,000
Last 1,00,000 at 6% = $6,000
Commission = $18,000; effective rate 3.60%; total pay $43,000
Paid on the whole sale at the tier reached, it would be 6% × 5,00,000 = $30,000
Commission by sales: 2%, then 4% from 2,00,000, then 6% from 4,00,000
| Sales | Slab by slab | Whole sale at the tier reached |
|---|---|---|
| $1,50,000 | $3,000 | $3,000 |
| $2,50,000 | $6,000 | $10,000 |
| $3,99,999 | $12,000 | $16,000 |
| $4,00,000 | $12,000 | $24,000 |
| $5,00,000 | $18,000 | $30,000 |
| $8,00,000 | $36,000 | $48,000 |
Two ways tiers are paid, and why the difference matters
A flat commission is simple: sales times the rate. Tiered plans reward higher sales with a higher rate, and are written in one of two ways. In the first, reaching a tier lifts the rate on everything sold in the period. In the second, the higher rate applies only to the slab of sales above each threshold, the way income-tax slabs work. On the example the two differ by $12,000: $18,000 slab by slab, $30,000 on the whole sale.
The whole-sale method creates cliffs. With the example tiers, sales one rupee short of 4,00,000 earn $16,000; reaching 4,00,000 earns $24,000. That is a strong incentive near a threshold — to close one more deal, or to move a sale from one period into the next. Slab by slab has no cliffs; each extra rupee of sales earns the rate of the slab it lands in. The table shows both across a range of sales.
Read your plan for the details this page cannot know: whether commission is on invoiced sales, collected sales or margin; whether returns and bad debts are clawed back; whether targets reset monthly, quarterly or yearly; and whether there is a cap. Commission is normally part of your taxable pay, and in some countries it counts towards the wages used for benefits. The page works out the arithmetic of the plan as you enter it. For the margin a sale earns the business, use the profit margin calculator; for any percentage, the percentage calculator; and for turning pay into an hourly figure, the salary to hourly calculator. This is arithmetic on the figures you enter, not financial advice.
Frequently asked questions
How do I calculate commission?
Multiply sales by the rate. With tiers, either the whole sale is paid at the tier reached, or each slab at its own rate. On $5,00,000 with the example tiers that is $30,000 or $18,000.
What is the difference between tiered and slab commission?
In a whole-amount tier, reaching a threshold raises the rate on all sales in the period. In a slab (marginal) plan, the higher rate applies only to the sales above the threshold.
What is the effective commission rate?
Commission divided by sales. In the example, 18,000 ÷ 5,00,000 = 3.60%.
Is commission taxable?
Commission is normally taxed as part of your pay. The page does not work out tax; your payslip or tax rules do.
Related calculators
References
- Zoltners AA, Sinha P, Lorimer SE. Building a Winning Sales Force: Powerful Strategies for Driving High Performance. AMACOM, 2009. Sales compensation design: commission rates, tiers, thresholds and accelerators.
- Johnston MW, Marshall GW. Sales Force Management. Routledge. Straight commission, salary plus commission, and progressive (tiered) commission rates.