Flat-rate commission
The simplest commission structure applies a single percentage to the entire sale (or the entire period's total sales): commission = sale amount × rate. A 5% commission on a $40,000 sale is $40,000 × 0.05 = $2,000, full stop — no matter how big or small the sale is, the rate stays the same. If you just need the raw percentage math without the sales-specific context, a general percentage calculator handles the same "X% of Y" arithmetic.
Flat-rate plans are common for straightforward sales roles where the company wants predictable, easy-to-explain payouts, and they're the easiest structure to verify by hand.
Tiered (graduated) commission
A tiered structure pays a higher rate as sales volume increases, similar in concept to how income tax brackets work — each tier's rate only applies to the portion of sales that falls within that tier, not to the entire sale.
For example, a plan might pay 3% on the first $50,000 of sales, 5% on the next $50,000 (from $50,000 to $100,000), and 7% on everything above $100,000. On a $120,000 sale, that works out to: $50,000 × 3% = $1,500, plus $50,000 × 5% = $2,500, plus the remaining $20,000 × 7% = $1,400 — a total of $5,400, not $120,000 × 7% ($8,400). Mixing up "the top rate applies to everything" with "the top rate only applies to the top tier" is one of the most common commission math mistakes.
| Tier | Range | Rate | Commission on that tier |
|---|---|---|---|
| 1 | $0 – $50,000 | 3% | $1,500 |
| 2 | $50,000 – $100,000 | 5% | $2,500 |
| 3 | $100,000 – $120,000 | 7% | $1,400 |
| Total | $5,400 | ||
Enter your sale amount and rate structure — get the exact commission owed
Commission Calculator →Common commission plan structures
Flat and tiered rates describe how the percentage is calculated, but real-world compensation plans usually layer that math on top of a broader structure:
- Straight commission — no base salary at all; 100% of pay comes from commission. Common in real estate and some outside sales roles.
- Base plus commission — a fixed salary plus commission on top, the most common structure in B2B and SaaS sales, since it balances income stability with performance incentive.
- Residual (or trailing) commission — ongoing commission paid for as long as an account stays active, common in insurance and subscription-based sales, rather than a one-time payout tied to the initial sale.
- Territory or split commission — commission divided among multiple people who contributed to closing a deal (e.g., an account executive and a sales development rep), based on an agreed split percentage rather than a graduated tier.
One more useful way to think about a tiered plan: your effective commission rate on the whole sale is really a weighted average of the rates from each tier, weighted by how much of the sale fell into each one. On the $120,000 example above, the effective rate works out to $5,400 ÷ $120,000 = 4.5%, lower than the top 7% tier because most of the sale sat in the lower tiers.
Working backward: finding the sale amount
Sometimes you know how much commission you earned (from a pay stub, for example) and want to figure out what sale amount produced it. For a flat rate, this is simple division: sale amount = commission ÷ rate. Earning $2,000 at a 5% flat rate means the underlying sale was $2,000 ÷ 0.05 = $40,000.
This reverse calculation only works cleanly for a flat rate. With a tiered structure, the same total commission can come from different combinations of tier boundaries and sale amounts, so there isn't a single unambiguous sale amount to solve for — you'd need to know which tiers the sale actually crossed to reconstruct the number.
Draws against commission
A "draw" is money paid to a salesperson upfront, before commission is actually earned — essentially an advance. Once commission is calculated for the period, the draw amount gets subtracted from what's owed. If someone earned $5,400 in commission but already received a $2,000 draw, they're owed the remaining $3,400.
What happens when the draw exceeds the commission earned varies by agreement: some plans are "recoverable," meaning the shortfall carries forward and gets deducted from future commission; others are "non-recoverable," meaning the salesperson keeps the draw regardless. Always check the specific terms of a commission agreement rather than assuming either default.
Common gotchas
- Caps and accelerators — some plans cap total commission at a maximum, or pay an "accelerator" (an even higher rate) once a rep exceeds their quota.
- Clawbacks — commission on a sale that's later returned, canceled, or unpaid by the customer may be deducted from a future paycheck.
- Split commission — deals involving two salespeople (e.g., an account exec and an SDR) often split the commission by an agreed percentage, which isn't a graduated tier at all.
How commission shows up on your paycheck
Commission rarely lands on your bank account as the exact number you calculated by hand, because payroll withholds taxes before you ever see it. In the US, the IRS classifies commission as a "supplemental wage," and employers have two options for withholding it: the percentage method, which withholds a flat 22% for federal income tax (37% if your combined supplemental wages for the year exceed $1 million), or the aggregate method, which combines your commission with your regular salary for that pay period and withholds based on the total using your W-4 elections.
The aggregate method often withholds more upfront than the percentage method, especially if commission pushes that single paycheck into a higher apparent tax bracket for withholding purposes. Either way, this is only withholding, not your final tax bill — your actual liability at filing time is based on your total annual income, and any excess withheld comes back as part of your refund. To see how a specific commission payout, combined with your base salary, actually nets out after federal, FICA, and state taxes, run the numbers through a paycheck calculator rather than assuming the commission percentage alone tells you what hits your bank account.
FAQ
Does a tiered rate apply retroactively to the whole sale?
No — each tier's rate only applies to the sales amount that falls within that specific tier, not to the full sale total.
What if my draw is bigger than my commission?
Depends on your agreement — some plans carry the shortfall forward (recoverable draw), others let you keep it (non-recoverable draw). Check your specific plan.
Is this the same as what my employer will actually pay?
This covers the core math of flat and tiered commission. Real-world plans often add caps, accelerators, or clawback clauses on top of the base calculation — confirm your exact plan's rules with your employer.
Can I calculate the sale amount from my commission?
Yes, for a flat rate — divide the commission by the rate. For a tiered structure, there's no single answer without knowing which tiers the sale actually crossed, since different sale amounts can produce the same total commission.
What's the difference between base-plus-commission and straight commission?
Straight commission means 100% of pay is commission-based with no fixed salary, common in real estate. Base-plus-commission pairs a fixed salary with commission on top, which is the more common structure in B2B and SaaS sales roles.
Does commission get taxed differently than regular pay?
In the US, the IRS often treats commission as "supplemental wages," which can be withheld at a flat federal rate (commonly 22% for withholding purposes) rather than through your regular W-4 withholding — though your actual tax liability at filing time is based on your total annual income, not the withholding method.