Commission is the sale amount times your commission rate. A 4% rate on a $30,000 sale pays $1,200.
The calculator applies one flat rate to one amount. Your plan may split sales into tiers, pay on a different base, or pay weeks after the sale. Here's how to handle each of those.
Flat, banded or retroactive: which tiers do you have?
A flat plan pays one rate on every dollar. A tiered plan changes the rate at a threshold, in one of two ways. In a banded plan, the higher rate applies only to sales above the threshold. In a retroactive plan, crossing the threshold lifts every dollar to the higher rate.
Here's $80,000 of sales under each, with a $50,000 threshold, 5% below it and 8% above:
| Plan, on $80,000 of sales | Sales the rate applies to | Rate | Commission |
|---|---|---|---|
| Flat 6% on everything | $80,000 | 6% | $4,800 |
| Banded tiers: first $50,000 | $50,000 | 5% | $2,500 |
| Banded tiers: the $30,000 above | $30,000 | 8% | $2,400 |
| Retroactive tier: 8% on all sales once past $50,000 | $80,000 | 8% | $6,400 |
The banded plan pays $2,500 + $2,400 = $4,900. The retroactive plan pays $6,400 for the same sales. For a banded plan, run the calculator once per band and add the results.
The cliff in a retroactive plan
At $49,000 of sales, the retroactive plan pays $2,450, all at 5%. At $51,000, it pays $4,080, all at 8%. So the last $2,000 of sales earns you $1,630. Find out which kind of tier you have before a deal slips into next month.
What is the rate applied to?
The same rate pays very different amounts depending on the base. A plan may use the list price, the invoiced price after discounts, or the gross profit on the deal. Gross profit is the price minus what the goods or service cost.
Take a $50,000 sale that costs $35,000 to deliver, leaving $15,000 of gross profit. Here's a 5% revenue plan next to a 15% gross-profit plan, with and without a 10% discount:
| Plan and deal | Base | Rate | Commission |
|---|---|---|---|
| Revenue plan, full $50,000 price | $50,000 | 5% | $2,500 |
| Revenue plan, 10% discount | $45,000 | 5% | $2,250 |
| Gross-profit plan, full price | $15,000 | 15% | $2,250 |
| Gross-profit plan, 10% discount | $10,000 | 15% | $1,500 |
The discount trims the revenue-based commission by 10% but cuts the profit-based one by a third. Each $1,000 of discount costs you $150 under the profit plan, against $50 under the revenue plan.
For the company, the base matters just as much. A 3% commission on a product with a 40% gross margin uses up 7.5% of that margin: 3 ÷ 40. The margin calculator shows what's left after costs.
When is commission earned?
The rate is only half the plan. Before you count on the money, find these terms in writing:
- Trigger: is commission earned when the contract is signed, when it's invoiced, or when the customer pays?
- Clawback: do you hand it back if the customer cancels, returns the goods or never pays?
- Timing: is it paid with your next paycheck, monthly or quarterly?
- Leaving: what happens to your deals that close after you've left?
Draws, quotas and accelerators
A draw is an advance against commission you haven't earned yet. With a recoverable draw, any shortfall carries forward and comes out of later commission. Say you draw $3,000 but earn $2,200: you start next month $800 behind. A non-recoverable draw doesn't have to be paid back.
A quota is the sales target your plan measures you against. An accelerator raises your rate on sales above quota, much like the banded tiers above.
Turning commission into a yearly income
Multiply the sales you expect by your rate, then annualize. At $60,000 of sales a month and 4%, commission is $2,400 a month. The annual income calculator turns that into $28,800 a year.
Base the estimate on sales you've actually closed, not on a target. Mortgage lenders do. Fannie Mae's Selling Guide wants a recent paystub and two years' W-2s, or an employer's verification form. It prefers a two-year history, may accept 12 months, and averages this year's and last year's pay. Falling commission counts only once the lender confirms it has stabilized.
The Bureau of Labor Statistics offers a yardstick. Full-time workers' median weekly earnings were $1,251 in the second quarter of 2026. That figure counts the commissions people usually receive. Selling a home rather than a product? The real estate commission calculator applies an agent's rate to the sale price.