Commission Calculator
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Sales & Rate Structure
Total Commission
Enter a sales amount and rate structure to calculate commission.
Understanding Sales Commission Structures
Sales commission is typically paid one of two ways: a flat percentage of every sale, or a progressive tiered structure where the rate increases as a salesperson hits higher volume thresholds. Tiered plans reward top performers with a higher blended rate without requiring a separate negotiation for every deal -- this calculator models both, plus the On-Target-Earnings total when a base salary is part of the package.
Flat Rate: Simple and Predictable
A flat rate pays the same percentage on every dollar of sales, regardless of volume. It's easy to forecast but doesn't reward hitting a big month any differently than a slow one.
Tiered: Progressive, Not All-or-Nothing
Tiered commission works exactly like progressive income tax brackets -- only the portion of sales inside a given tier earns that tier's rate. Crossing into a higher tier doesn't bump the rate on sales already earned in lower tiers.
Comparing Structures Fairly
To compare a tiered plan against a flat-rate offer, look at the effective blended rate (total commission ÷ total sales) rather than the top tier's rate -- the blended rate is what you actually earned, on average, across the whole deal volume.
On-Target Earnings (OTE)
Many sales roles pair a base salary with commission. OTE is the sum of both at a target sales level -- a common way recruiters and hiring managers frame total compensation for a sales position.
Worked Example
Suppose you close $20,000 in sales this month under a tiered plan: 5% up to $10,000, 7% from $10,000–$25,000, and a $40,000 base salary:
- Tier 1 (first $10,000 at 5%): $500.00.
- Tier 2 (remaining $10,000 at 7%): $700.00.
- Total commission: $500.00 + $700.00 = $1,200.00.
- Effective blended rate: $1,200.00 ÷ $20,000 = 6.00% -- between the two tier rates, as expected.
- OTE total: $40,000 + $1,200.00 = $41,200.00 for the month.
$20,000 in Tiered Sales
- Total Commission: $1,200.00
- Effective Rate: 6.00%
- OTE Total: $41,200.00
Choosing Between Flat and Tiered Pay
Flat-rate plans are simpler to understand and forecast, which suits stable, predictable sales cycles. Tiered plans add complexity but create a stronger incentive to push past quota, since the marginal dollar earned late in a period is worth more than the first dollar. When evaluating a job offer or comparing your own performance against a colleague's, always normalize back to the effective blended rate -- comparing raw tier percentages side by side can be misleading if the sales volumes differ.
Key Takeaways
- Tiers Are Progressive, Not Retroactive: Reaching a higher tier only raises the rate on sales inside that tier -- earlier tiers keep their own rate.
- Compare Blended Rates, Not Top Rates: The effective blended rate is the true apples-to-apples comparison point between different commission structures.
- OTE Combines Base and Commission: A role's real earning potential is best judged by OTE, not commission alone.
- Model Your Own Tiers: Every plan's thresholds and rates differ -- adjust the tier inputs here to match your actual compensation plan for an accurate projection.