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Commission Calculator

Compute your sales commissions quickly. Factor in base salary and graduated commission tiers based on revenue.

Calculator Parameters
Sales Details
$
Total value of closed deals
%
Percentage earned on sales
$
Guaranteed pay period amount
Tiered Kickers (Optional)
>$
Revenue amount to unlock higher rate
%
New rate applied to the excess
Summary
Total Gross Income
$12,500
$5,000
Commission Earned
5.0%
Effective Commission Rate
Allocation Split
Salary Share: 44.4% Commission Share: 55.6%
Education

Demystifying Sales Compensation Architectures

Understanding OTE, Base, and how tiered structures incentivize high performance.

The OTE (On-Target Earnings) Structure

In most professional sales roles (like Software-as-a-Service, Medical Devices, or Real Estate), total compensation is rarely a flat salary. It is expressed as an OTE (On-Target Earnings).

An OTE is the total amount you are expected to earn if you hit 100% of your primary sales quota. It is typically comprised of two equal halves (a 50/50 split):

  • Base Salary: A guaranteed minimum stipend paid out identically every pay period regardless of performance.
  • Variable Commission: Pure performance pay awarded as a flat percentage of the revenue you generate.

If a job offers a "$120k OTE with a 50/50 split", you receive a guaranteed $60k base salary, and are expected to earn $60k in commission by hitting a target (e.g., selling $1.2M in software at a 5% commission rate).

Straight Commission (100% Variable)

A Straight Commission role has a $0 Base Salary. The salesperson operates entirely on the revenue they hunt. Real Estate agents working for a brokerage, car salespeople, and independent insurance brokers are common examples.

While extremely risky in slow months (as take-home pay can drop to literally zero), the commission rates are exceptionally high (often 20% to 50% of the gross margin) compared to the standard 5-10% in a heavily salaried corporate role.

Graduated Tiers (Accelerators and Kickers)

Sales roles are designed to reward massive over-performance. Once a salesperson hits 100% of their quota, most modern compensation plans introduce "Accelerators" or Tiered rates.

Example: You earn 5% on all revenue up to $100,000. If you sell $150,000, a Tier 2 "Accelerator" kicks in. The first $100k is paid at 5%, but the excessive $50k is paid at a massive 12%. This structure drastically ramps up earnings exponentially for elite performers.

Our calculator supports one tier logic: enter your Tier 2 Threshold and Tier 2 Rate to see how much your paycheck jumps.

Q&A

Frequently Asked Questions

Answers to common queries regarding draws and clawbacks.

What is a 'Draw' against Commission?
A draw is a cash advance against future commissions, common in 100% commission roles. A "recoverable draw" must be paid back to the employer from future sales if you fail to hit quota. A "non-recoverable draw" acts effectively as a temporary base salary while you ramp up.
What are Clawbacks?
If you earn an upfront commission on a contract, but the customer cancels or goes bankrupt within a specific window (e.g., 90 days), the employer will legally deduct ("clawback") that commission from your next paycheck.
Is commission taxed higher than salary?
No. While commission checks frequently have a flat 22% federal "supplemental withholding rate" applied instantly by payroll software, it is ultimately taxed at your standard marginal income bracket at the end of the year. Any over-withholding is returned as a massive tax refund.
Do I get commission on total revenue or gross margin?
Usually revenue. SaaS and software roles pay on Gross Revenue because the product has nearly zero marginal cost. However, physical manufacturing roles (where creating the item costs heavy capital) often pay purely on Gross Margin (Profit).