# Commission calculator

https://salesbond.app/tools/commission-calculator/
Updated: 2026-11-05

# Commission Calculator (Tiered Commission and OTE)

Commission = sales × commission rate: 5% of 40,000 is 2,000. With tiers, each band earns its own rate, so 5% up to 50,000, 8% up to 100,000 and 10% above pay 8,500 on 120,000 of sales. OTE, on-target earnings, is base salary plus the commission paid at 100% of quota.

Work out a commission at a flat rate, find the rate you were paid, or run a tiered plan with up to three bands, graduated or retroactive. The OTE mode shows the pay mix and what a rep earns at any quota attainment, with an accelerator above 100%.

## Commission formula

Commission = sales × rate ÷ 100. Commission rate (%) = commission ÷ sales × 100. Graduated tiers: add up each band × its rate. OTE = base salary + target commission. Pay at quota attainment = base + target commission × attainment, with the part above 100% multiplied by the accelerator.

## Worked example

| Case | Result |
| --- | --- |
| 5% of 40,000.00 of sales | 2,000.00 |
| 3,000.00 paid on 60,000.00 of sales: rate | 5.00% |
| 120,000.00 of sales, tiers 5% to 50,000, 8% to 100,000, 10% above | 8,500.00 (7.08%) |
| Same sales, retroactive tiers | 12,000.00 |
| Base 60,000.00 + target commission 40,000.00: OTE, pay mix | 100,000.00, 60: 40 |
| 120% of quota with a 1.5× accelerator: total pay | 112,000.00 |

## Commission structures

A straight commission pays only commission; base plus commission adds a fixed salary; tiered plans raise the rate as sales grow; gross margin plans pay on profit rather than revenue, which stops reps from buying deals with discounts. Draws advance commission against future earnings. Whatever the structure, write down what counts as a sale, when commission is earned (signed, invoiced or paid) and what happens on refunds.

## Commission on revenue or on gross profit

Paying on revenue is simple but rewards discounting. Paying on gross profit ties the rep to the margin: a 10% rate on 20,000 of gross profit pays 2,000, the same as 5% on 40,000 of revenue at a 50% margin, but a discount now cuts the rep’s commission too. Check the margin of a deal with the [margin calculator](https://salesbond.app/tools/margin-calculator/).

## Frequently asked questions

### How do you calculate commission?

Multiply the sales amount by the commission rate. A 5% commission on 40,000 of sales is 40,000 × 0.05 = 2,000. Check what the rate applies to in your plan: revenue, gross profit or collected cash can give very different numbers.

### How does tiered commission work?

Each band of sales earns its own rate, like tax brackets. With 5% up to 50,000, 8% from 50,000 to 100,000 and 10% above, sales of 120,000 earn 2,500 + 4,000 + 2,000 = 8,500. In a retroactive plan, all 120,000 would earn 10%, or 12,000.

### What does OTE mean?

OTE stands for on-target earnings: base salary plus the commission a rep earns at exactly 100% of quota. A 60,000 base with 40,000 of target commission is a 100,000 OTE with a 60/40 pay mix. Actual pay is higher or lower depending on how much of the quota the rep hits.

### What is a commission accelerator?

An accelerator pays a higher rate on sales above quota to reward overperformance. With 40,000 of target commission and a 1.5× accelerator, a rep at 120% of quota earns 40,000 for the first 100% plus 1.5 × 8,000 = 12,000 for the extra 20%, or 52,000.

### What is a typical sales commission rate?

It depends on the product, the deal size and how much of the work the rep does. Plans built on gross profit often pay more than plans built on revenue. Compare rates in your industry and, above all, model the total pay at 50%, 100% and 150% of quota before you sign a plan.

### Is commission taxed differently from salary?

In most countries commission is taxed as ordinary employment income together with salary, although employers may withhold tax on it differently. Ask your payroll team or the tax authority in your country how commission is withheld.

Related tools: [gross profit calculator](https://salesbond.app/tools/gross-profit-calculator/), [margin calculator](https://salesbond.app/tools/margin-calculator/), [conversion rate calculator](https://salesbond.app/tools/conversion-rate-calculator/). More on sales and running a sales team on the [SalesBond blog](https://salesbond.app/blog/) and the [home page](https://salesbond.app/).

## Official sources

- [IFRS Foundation: IFRS 15 Revenue from Contracts with Customers](https://www.ifrs.org/issued-standards/list-of-standards/ifrs-15-revenue-from-contracts-with-customers/) — sales commissions as incremental costs of obtaining a contract.

**Updated on Nov 5, 2026.** This calculator is for information only and is not tax, legal or payroll advice. Results come from the formulas above; your compensation plan decides what counts as a sale, when commission is earned and how it is taxed.