Boneyard Tools

How sales commission structures work

A plain guide to commission-only, base plus commission and tiered plans, how each is calculated, and how draws and quotas change take-home pay.

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The core calculation

At its simplest, commission is a percentage of a sale that a salesperson keeps. Multiply the sale amount by the rate written as a decimal: a 5 percent rate on a 10,000 sale pays 500. Everything else in a compensation plan is a variation on that single multiplication. Understanding the base calculation makes it easy to check a payslip or model what a deal is worth before you close it.

Commission-only versus base plus commission

In a commission-only plan, all pay comes from the percentage of sales, which rewards high performers but carries risk in slow months. A base plus commission plan pays a fixed salary on top of the commission, trading a lower rate for steadier income. This calculator models both: leave the base at zero for commission-only, or enter a salary to see total earnings as base plus commission. A 2,000 base on a 500 commission month totals 2,500.

Tiered and accelerated plans

Many teams use tiered plans where the rate rises once a rep passes a threshold, so early sales might pay 5 percent and sales above quota pay 8 or 10. To model a tiered plan here, split the sales into the portion in each tier, calculate each portion at its own rate, and add the commissions. Accelerators work the same way, applying a higher multiplier to revenue past target to motivate reps to keep selling once quota is met.

Draws, quotas and clawbacks

Some plans advance a draw against future commission, essentially a loan the rep repays out of what they earn, which is why one month's take-home can differ from the raw commission. Quotas set the sales target that unlocks accelerators or bonuses. Clawback clauses can reverse commission if a customer refunds or cancels. This tool gives the gross commission on a sale, a clean starting point before those plan-specific adjustments and before tax are applied.

Frequently asked questions

What is a draw against commission?

A draw is an advance the employer pays against commission you have not yet earned. When your commission exceeds the draw you keep the difference, and if it falls short you may owe the balance back, depending on whether the draw is recoverable.

Should commission be paid on revenue or profit?

It depends on the plan. Revenue-based commission is simpler and common in high-volume sales, while margin-based commission protects the company on discounted deals. Enter whichever base your plan uses into the sale amount field.