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How to calculate sales commission

Multiply your commissionable sales by your commission rate, then apply your plan's extra rules, such as tiers above quota or a bonus floor. $250,000 at 10% is $25,000 before any of those rules.

Step by step

Find your commissionable sales. Use the amount your plan pays on: contract value, first-year value, recurring revenue or margin. For upsells, many plans count only the increase.
Identify your plan type. Straight commission pays one rate. Tiered plans pay higher rates above thresholds. Quota-based bonus plans pay a share of a target amount based on attainment.
Apply the formula for that plan. Straight: sales × rate. Tiered: each slice × its rate. Bonus: target × attainment, subject to the floor and cap.
Adjust for what's already been paid. Subtract earlier payouts on cumulative plans, recovered draws, and any clawbacks for cancelled deals.

Formula

Straight:     Sales × Rate
Tiered:       Σ (Sales in each tier × Tier rate)
Quota bonus:  Target bonus × Attainment  (0 below floor, max 100% in-year)

Example

Straight: $250,000 × 10% = $25,000.

Tiered: $1,000,000 × 10% + $200,000 × 15% = $130,000.

Quota bonus: $80,000 target, half a year in, 75% attainment: $80,000 × 0.5 × 75% = $30,000 earned so far.

How does your commission plan work?

Which plan do you have?

Open your comp plan and look for one of these patterns. If you see a table that maps % of quota to % of target paid, it's a quota-based bonus. A single percentage of sales is straight commission. Rates that change at thresholds are tiered.

Straight Commission

You earn a fixed percentage of every sale, at any level of performance.

Your plan reads like “8% of contract value” with no quota table.

Quota-Based Bonus

You have a target bonus that pays out based on how much of your quota you reach.

Your plan mentions a target incentive, a payout curve, or nothing paid below a threshold such as 50%.

Tiered Commission / Accelerators

Your commission rate goes up once you pass quota or another threshold.

Your plan mentions accelerators, multipliers like 1.5x, or different rates at different attainment levels.

Still not sure?

Plans often combine these, for example a bonus up to quota and a commission rate above it.

Read how to calculate sales commission for a worked example of each.

Common questions

What is a draw against commission?

A draw is an advance paid before commission is earned. A recoverable draw is repaid out of future commission; a non-recoverable draw isn't. Subtract recoverable draws when working out what you'll actually receive.

How is commission calculated on a split deal?

Each rep is credited their agreed share of the deal, often 50/50, and commission is calculated on that share. Some plans credit both reps in full for quota but split the commission.

Do renewals pay commission?

Sometimes, often at a lower rate than new business, and sometimes only for the increase over the prior contract. Many new business plans exclude renewals entirely.

Why doesn't my calculation match my paycheck?

Check timing (signed vs invoiced vs paid), crediting rules, floors, caps, earlier payouts on cumulative plans, clawbacks and tax withholding. The plan document and your commission statement are the final word.

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