How to Calculate Commission
What is Commission?
A sales commission is a percentage of sales revenue paid to a salesperson as compensation for generating business. Commission structures vary widely — flat rate, tiered (higher rate at higher volumes), split (between multiple reps), or residual (recurring on ongoing contracts).
Step-by-Step Guide
- 1Commission = Sales × Commission rate
- 2Total earnings = Base salary + Commission
- 3OTE (On-Target Earnings) = Base + expected commission at quota
- 4Commission rate typically ranges from 2–10% for most industries
Worked Examples
Input
$80,000 in sales, 5% commission, $2,000 base
Result
$6,000 commission, $8,000 total
$80,000 × 0.05 = $4,000 + $2,000 base
Input
Tiered: 3% on first $50k, 6% above
Result
$4,500 on $75k sales
$1,500 + $3,000 from different tiers
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