Sales Commission Calculator
Enter your sales amount and commission rate to see your commission and total earnings in seconds. Choose from four commission structures: flat rate on gross sales, commission on gross margin, excess-above-threshold, or a three-tier progressive rate. Add a base salary and the calculator shows your full on-target earnings (OTE). The "show your work" panel walks through each step of the math.
Formula
Worked example
A rep closes $50,000 in sales on a flat 5% commission: $50,000 x 5% = $2,500. With a $3,000 base salary, total earnings (OTE) = $3,000 + $2,500 = $5,500. On a tiered structure (3% up to $20k, 6% up to $40k, 10% above): ($20,000 x 3%) + ($20,000 x 6%) + ($10,000 x 10%) = $600 + $1,200 + $1,000 = $2,800.
What is a sales commission?
A sales commission is a percentage-based payment earned when a salesperson closes a deal or reaches a revenue goal. It is the primary variable component of most sales compensation packages. Unlike a flat salary, commission directly ties pay to performance: the more you sell, the more you earn. Most employers pair commission with a base salary to provide income stability while still rewarding top performers. The total of base salary plus maximum expected commission is called on-target earnings (OTE).
The four main commission structures
Flat-rate commission is the simplest: multiply total sales by a fixed percentage. Gross-margin commission applies the rate to profit (sales minus cost of goods), rewarding reps for protecting margins rather than just chasing top-line revenue. Excess-above-threshold (or "cliff") commission pays nothing until sales exceed a quota, then applies the rate only to the portion above that line - common where reps have a large base salary already. Tiered commission assigns progressively higher rates to successive revenue bands, so a rep who closes $60,000 in a 3%/6%/10% structure earns more per dollar in the upper bands than in the lower ones, encouraging stretch performance.
How to use this calculator
Select your commission structure from the dropdown, enter your gross sales, and fill in the rate and any structure-specific fields (COGS for margin, threshold for cliff, or the tier ceilings and rates for tiered). Add a base salary if applicable to see your total on-target earnings. The "Show your work" panel walks through every arithmetic step with your actual numbers, and the chart shows how your earnings would change across a range of sales levels.
Commission rate benchmarks by industry
Commission rates vary enormously across industries. Real estate agents typically earn 2-3% of the sale price per agent side. B2B software reps often earn 5-15% of annual contract value. Recruiters commonly earn 15-25% of the placed candidate's first-year salary. Financial advisors may earn 3-10% of premiums or AUM. These figures are rough benchmarks - your actual rate will depend on your base salary, deal size, sales cycle, and employer. A high commission rate usually signals either a commission-only structure (no base) or a highly competitive, performance-driven environment.
Typical commission rates by industry
| Industry | Typical rate | Applied to |
|---|---|---|
| Real Estate | 2% - 3% | of sale price per agent side |
| Retail / Consumer goods | 2% - 8% | of net sales |
| B2B Software (SaaS) | 5% - 15% | of annual contract value (ACV) |
| Financial services | 3% - 10% | of premium or AUM |
| Automotive | 20% - 30% | of gross profit on deal |
| Pharmaceutical / Medical | 3% - 10% | of net sales |
| Recruiting / Staffing | 15% - 25% | of placed candidate salary |
| Insurance | 5% - 15% | of first-year premium |
Rates vary widely by company, deal size, and experience level. Use these as rough benchmarks.
Frequently asked questions
What is the difference between commission and a bonus?
Commission is calculated automatically as a percentage of each sale and is directly tied to individual deals. A bonus is typically a discretionary or milestone-based payment decided by management at a set time, such as quarterly or annually. Commissions are predictable (you know the rate in advance) while bonuses are less certain. Many compensation packages include both.
How does a tiered commission structure work?
In a tiered structure, different commission rates apply to successive bands of revenue. For example: 3% on the first $20,000, 6% on the next $20,000, and 10% on anything above $40,000. These tiers are progressive - the higher rate applies only to the portion of sales in that band, not to all sales once you cross a threshold. This creates a strong incentive to keep pushing past each ceiling. Use the tiered mode in this calculator to enter your tier ceilings and rates.
What does OTE (on-target earnings) mean?
On-target earnings (OTE) is the total compensation a salesperson is expected to earn if they hit 100% of their quota - base salary plus commission at plan. OTE is the headline number used in job postings and offer letters. If a posting says "$80,000 OTE" with a 50:50 split, you can expect a $40,000 base and $40,000 in commission if you hit your target.
Is commission taxed differently from salary?
In the United States, commission is ordinary income and is subject to federal, state, and local income tax as well as FICA (Social Security and Medicare). Employers may withhold at a flat 22% supplemental rate on commission checks, but your actual tax will depend on your total income for the year. If your employer withholds more than needed, you will receive a refund when you file your return. Consult a tax professional for advice specific to your situation.
What is a draw against commission?
A draw is an advance against future commission. A "guaranteed draw" means the employer pays a minimum even if you earn less in commission that month, with no repayment required. A "recoverable draw" means the advance must be paid back from future commissions. Draws are common in new-hire ramp periods when a rep is still building their pipeline.
How do I calculate my effective commission rate?
Divide your total commission earned by your gross sales, then multiply by 100. For example, if you earned $3,500 commission on $50,000 in sales, your effective rate is $3,500 / $50,000 x 100 = 7%. In tiered or threshold structures the effective rate will differ from any single stated rate because not all dollars of sales are treated equally.