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Commission Calculator: Flat Rate and Tiered Plans
Enter your sales for the period and choose a flat rate or a three-tier plan. The calculator shows commission per tier, your effective rate and total pay including any base salary.
Flat-rate commission
A flat plan pays one percentage of sales, so commission = sales × rate ÷ 100. Sales of 50,000 at 4% earn 2,000. It is easy to explain and to forecast, but it rewards a first sale the same as the hundredth, which is why many employers add tiers.
Flat plans are common where margins are thin or the sales cycle is short. The weakness is that the rate rarely reflects profit: a discounted sale and a full-price sale pay the same percentage on their different amounts. If your plan pays on gross profit instead of revenue, enter the profit figure as the sales amount, so the same arithmetic applies to the correct base.
Marginal and retroactive tiers
A tiered plan raises the rate as sales grow. There are two common ways to apply the rates, and they give very different results from the same numbers.
- Marginal: each rate applies only to the slice of sales inside its band. For sales of 80,000 with the default plan, 20,000 × 3% = 600, 30,000 × 5% = 1,500 and 30,000 × 7% = 2,100, giving 4,200 in total, an effective rate of 5.25%.
- Retroactive: the rate for the band you reach applies to all sales. At 80,000 the top rate of 7% applies to everything, giving 5,600.
In this tool, a sales figure exactly equal to a threshold belongs to the lower band. Check how your own plan treats the boundary, because contracts sometimes say "up to" and sometimes "from".
Reading the effective rate
The effective rate is total commission divided by total sales. In a marginal plan it climbs slowly towards the top rate but never reaches it. In a retroactive plan it jumps at each threshold. Comparing two plans by effective rate at the sales level you actually expect is more useful than comparing the headline percentages.
The optional base salary is simply added at the end. If your employer pays commission as a draw against future earnings, or deducts returns and cancellations, your real figure will differ from this simple arithmetic.
Questions to ask about a plan
- Is commission paid on revenue, gross profit or collected cash? A plan on profit has a different base from one on sales.
- Do thresholds reset monthly, quarterly or yearly?
- Are refunds, discounts and unpaid invoices deducted?
- Is there a cap on commission, or an accelerator above quota?
- What happens to commission on sales closed before you leave?
These terms change the result more than the percentages do. The calculator provides an estimate and does not replace your written commission agreement. To compare pay across periods, use the salary calculator.
Worked example
A salesperson sells 80,000 in a month under a plan paying 3% up to 20,000, 5% from 20,000 to 50,000 and 7% above that, plus a base salary of 2,000.
Inputs
| Sales for the period | 80000 |
|---|---|
| Plan type | Three tiers |
| How tiers apply | Marginal (each rate applies to its slice only) |
| Tier 1 ends at sales of | 20000 |
| Tier 1 rate | 3 % |
| Tier 2 ends at sales of | 50000 |
| Tier 2 rate | 5 % |
| Tier 3 rate (above tier 2) | 7 % |
| Base salary for the period | 2000 |
Result
An effective rate of 5.25% on sales of 80,000.00.
| Sales | 80,000.00 |
|---|---|
| Commission | 4,200.00 |
| Effective commission rate | 5.25% |
| Base salary | 2,000.00 |
| Total pay | 6,200.00 |
How the commission is built up
| Band | Sales in band | Rate | Commission |
|---|---|---|---|
| Tier 1 (up to 20,000) | 20,000.00 | 3.00% | 600.00 |
| Tier 2 (to 50,000) | 30,000.00 | 5.00% | 1,500.00 |
| Tier 3 (above 50,000) | 30,000.00 | 7.00% | 2,100.00 |
Financial disclaimer: Results are estimates for planning and education. They are not financial, tax or legal advice. Fees, taxes, rates and rules vary by lender, product and country, so confirm figures with your provider or a qualified adviser before making decisions.
Frequently asked questions
How do I calculate commission?
Multiply sales by the commission rate as a decimal. Sales of 50,000 at 4% give 2,000. With tiers, calculate each band separately and add them.
What is tiered commission?
It is a plan where the rate increases as sales pass set thresholds. The thresholds and rates come from your commission agreement.
What is the difference between marginal and retroactive tiers?
In a marginal plan each rate applies only to the sales inside its band. In a retroactive plan the rate of the highest band reached applies to all sales in the period.
Is commission calculated before or after tax?
This calculator shows gross commission before any income tax or other deductions. Your payslip will show the net amount after your employer applies the rules that cover you.
Can I include my base salary?
Yes. Enter the base pay for the same period and the result shows total pay as well as commission alone.
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References and sources
- Your commission plan document or employment contract defines the rates, thresholds, base and treatment of returns.
- International Labour Organization: guidance on wage payment and the protection of wages. Link