How to use this calculator
Start by entering your base salary and total sales volume for the period you want to calculate. Then choose between a flat commission rate, which applies the same percentage to all sales, or a tiered structure where the rate increases as you hit higher sales thresholds.
For tiered commission, enter each tier's sales threshold and the corresponding commission rate. The calculator applies each rate only to the sales within that tier, just as most real compensation plans work. You can add as many tiers as your plan includes.
The results display your total commission earned, total compensation (base plus commission), the percentage of your total pay that comes from commission, and your effective hourly rate based on a standard 2,080 hour work year. These numbers help you evaluate job offers, compare compensation plans, or forecast your earnings at different sales levels.
Understanding commission structures
A flat commission pays the same percentage on every sale regardless of volume. It is simple and predictable. A tiered structure pays higher percentages as you reach higher sales thresholds, rewarding top performers with accelerating returns.
Your effective hourly rate is calculated by dividing total earnings (base plus commission) by 2,080 hours (a standard work year). This helps you compare commission roles to salaried positions and understand the true value of your time.
Frequently asked questions
What is a good commission rate?
It varies by industry. Software sales: 5% to 15%. Real estate: 2.5% to 3% per side. Insurance: 5% to 20%. Retail: 1% to 10%. Higher rates come with lower base salaries or longer sales cycles.
Flat vs. tiered commission
Flat is simpler and predictable. Tiered rewards high performance with accelerating rates. If you consistently exceed targets, a tiered plan will pay significantly more than flat rate on the same sales volume.
How to negotiate commission
Research market rates, know your expected volume, and negotiate accelerators for above-target performance. Get the plan in writing with clear definitions of commissionable sales.
Draw vs. commission
A draw is an advance against future commissions during ramp-up. A recoverable draw must be repaid. A non-recoverable draw is forgiven. Commission is earned directly from closed sales.