Sales Commission Calculator

Sales commission is compensation paid to a salesperson as a percentage of the revenue or profit they generate. Commission structures vary widely — flat percentage, tiered, split, or draw-against models — each with its own formula.

Flat commission formula: Commission = Sale Amount × Commission Rate

Tiered commission formula (most common): Each tier applies only to sales within that tier’s range: Total Commission = Σ (Tier Sales × Tier Rate)

Gross profit commission: Commission = (Sale Price − Cost of Goods) × Commission Rate

Draw against commission: Net Commission = Total Earned Commission − Draw Amount (If earned < draw, the shortfall is carried forward as a debt against future earnings)

What each variable means:

• Sale Amount — the total revenue of the transaction (gross sales)
• Commission Rate — the percentage paid to the salesperson; ranges from 1% (real estate brokerages) to 30%+ (high-ticket SaaS, direct sales)
• Tiered rates — incentivize higher performance. Example: 5% on first $50K, 7% on $50K–$100K, 10% above $100K
• Draw — a guaranteed base advance against future commissions; protects reps during slow periods but must be repaid from commissions

Reference: typical commission rates by industry

• Real estate (agent): 2.5–3% of sale price
• Insurance: 5–15% of annual premium
• Software/SaaS: 8–12% of annual contract value
• Retail: 2–5% of sales
• Pharmaceutical (outside sales): 5–10%
• Car sales: 20–25% of dealer profit margin (not sale price)

Worked example — tiered commission: Salesperson’s monthly sales: $135,000

Tier structure:

• 5% on first $50,000 = $2,500
• 7% on $50,001–$100,000 = $3,500
• 10% on $100,001–$135,000 = $3,500

Total Commission = $2,500 + $3,500 + $3,500 = $9,500

Effective blended rate = $9,500 ÷ $135,000 = 7.04%

If a $5,000 draw was advanced at month start: Net paycheck = $9,500 − $5,000 = $4,500 (draw already paid)