Commission Calculator
Updated August 2026 · Free · No sign-up
Calculate sales commission under the structures that actually exist in offer letters: flat rate, tiered, base + commission, and draw against commission — plus your OTE math and effective earnings rate.
Quick answer: Commission = sales × commission rate. $60,000 in monthly sales at 8% = $4,800 commission. With a $40,000 base and that pace sustained, annual earnings = $40,000 + $57,600 = $97,600. Tiered plans apply higher rates to sales above each threshold.
The Four Commission Structures
| Structure | How it pays | Typical use |
|---|---|---|
| Flat rate | Sales × single % (5-10% common) | Simple products, transactional sales |
| Tiered | Higher % above thresholds (8% to $50k, 12% beyond) | Motivating over-quota performance |
| Base + commission | Salary + smaller % — commonly split 50/50 or 60/40 at OTE | Most B2B sales roles |
| Draw against commission | Advance recovered from future commissions | Long sales cycles, ramping reps |
Worked Examples
Example 1 — flat. $60,000 sales × 8% = $4,800.
Example 2 — tiered. 8% to $50,000, 12% above: $50,000 × 8% + $10,000 × 12% = $4,000 + $1,200 = $5,200 — the accelerator added $400 versus flat.
Example 3 — OTE decode. "$120,000 OTE, 60/40 split" = $72,000 base + $48,000 commission at 100% of quota. At 70% attainment (a realistic median), commission is ~$33,600 and total comp $105,600 — always model OTE at 60-80% attainment before accepting an offer.
Example 4 — recoverable draw. $3,000 monthly draw, $2,200 earned commission → you keep the $3,000 but carry an $800 deficit into next month. Chronic deficits are the plan telling you the quota or the territory is broken.
Commission and Taxes
Commission is supplemental income: paid separately, it is typically withheld at the flat 22% federal supplemental rate — same mechanics as the bonus tax calculator covers, and the same rule applies: actual tax is set by your bracket at filing, not by the withholding. FICA applies in full. Garnishment and 401(k) percentage deferrals also apply to commission checks.
Evaluating a Commission Offer (The Checklist)
- Attainment history: ask what % of reps hit quota last year — below 50% means the OTE is fiction.
- Cap or uncapped: capped commission caps your upside; uncapped with accelerators is the structure top reps demand.
- Clawbacks: what happens on customer churn or refund? 90-day clawback windows are standard; 12-month ones are hostile.
- Payment timing: on booking, invoice, or cash received? Cash-received plans can lag your sale by a quarter.
- Draw terms: recoverable vs non-recoverable during ramp — non-recoverable for the first 3-6 months is the fair standard.
- Convert to hourly reality: total realistic comp ÷ real hours via the salary to hourly calculator — a $130k OTE at 55-hour weeks may trail a $95k salaried role.
For Employers: Rates That Work
Benchmark ranges: transactional/retail 5-15% of sale; SaaS 8-12% of first-year ACV; real estate 2.5-3% per side; recruiting 15-25% of first-year salary; manufacturing rep lines 5-10%. The design rule: commission cost should track gross margin, not revenue — a plan paying 10% on a 20%-margin product hands half the profit to the rep. Pair plan modeling with the employer payroll tax calculator since commission carries full payroll loading.
Minimum Wage Floor
Commission-only pay must still average at least minimum wage per hour worked in most jurisdictions (and overtime rules can apply to inside sales). If a dry month takes you below the floor, the employer owes the difference — track your hours.
Frequently Asked Questions
How do I calculate commission?
Sales × commission rate. $60,000 at 8% = $4,800. For tiered plans, apply each rate to the slice of sales within its band and sum.
What does OTE mean?
On-Target Earnings: base + commission at exactly 100% quota attainment. Model offers at 60-80% attainment — ask what share of reps actually hit quota.
What is a typical commission rate?
Retail/transactional 5-15%, SaaS 8-12% of first-year contract value, real estate ~2.5-3% per side, recruiting 15-25% of placed salary.
What is a draw against commission?
An advance paid regardless of sales, recovered from future commissions (recoverable) or forgiven (non-recoverable). Ramping reps should push for non-recoverable.
How is commission taxed?
As supplemental wages — often withheld at a flat 22% federally when paid separately, but taxed at your ordinary bracket when you file. FICA applies in full.
Is commission-only pay legal?
Generally yes, but earnings must still average at least minimum wage per hour worked, and some inside-sales roles retain overtime rights.
✓ Formula verified • Last updated: August 20, 2026