Free Commission Calculator
Calculate your sales commission, total earnings, and effective commission rate. Supports flat rates, tiered structures, and bonus thresholds.
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Earn a bonus when sales exceed the threshold
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Understanding Sales Commission: Structures, Benchmarks & OTE
A commission calculator helps sales professionals, managers, and business owners determine how much commission is earned based on sales performance. Whether you use a flat rate or a tiered commission structure, understanding how your compensation works is key to forecasting income, negotiating offers, and designing effective sales incentive plans. This guide covers the most common commission structures, industry benchmarks, and how to calculate on-target earnings (OTE).
Types of Commission Structures
The most common commission structures in sales compensation include flat-rate, tiered, revenue-based, and gross-margin models. Each structure aligns incentives differently and is suited to different business models and sales cycles.
Flat-rate commission pays a fixed percentage on every dollar sold—simple and predictable. Tiered commission increases the rate as sales volume grows, rewarding top performers who exceed their quotas. For example, a rep might earn 5% on the first $100,000 in sales and 10% on everything above that, similar to progressive tax brackets. Revenue-based commission is calculated as a percentage of the total deal value, while gross-margin commission ties payout to profitability rather than top-line revenue, encouraging reps to avoid excessive discounting.
Industry Commission Benchmarks
Commission rates vary significantly by industry and role. In SaaS and software sales, account executives typically earn 8–12% of annual contract value (ACV), while sales development reps (SDRs) may receive a smaller commission or per-meeting bonus. Real estate agents traditionally earn 2.5–3% per side of the transaction, though structures are shifting. Insurance agents often earn 5–20% commission on new policy premiums, with renewal commissions at lower rates. Retail sales associates earn anywhere from 1–10%, with luxury goods and high-ticket items offering higher percentages. Financial advisors and mortgage brokers typically earn 0.5–2% on assets or loan values, respectively.
What Is OTE (On-Target Earnings)?
OTE stands for On-Target Earnings and represents the total annual compensation a salesperson can expect when they achieve 100% of their sales quota. OTE is calculated as base salary plus the commission earned at target performance. For example, a sales rep with a $60,000 base salary and $40,000 in expected commission at quota has an OTE of $100,000. The ratio between base and variable pay—often expressed as a split like 60/40 or 50/50—signals how aggressive the compensation plan is. A higher variable component means more earning potential but also more risk. Use our commission calculator to model different OTE scenarios by adjusting your base salary, sales targets, and commission rates.
Commission Accelerators and Bonuses
Many sales compensation plans include accelerators—higher commission rates that kick in once a rep exceeds their quota. For example, a plan might pay 10% up to quota and 15% on all sales above quota. This rewards overperformance and is common in enterprise and SaaS sales. Bonuses work differently: they are one-time payments triggered when a salesperson hits a specific threshold, such as a quarterly sales target or annual revenue goal. Some companies also offer SPIFs (Sales Performance Incentive Funds)—short-term bonuses for selling specific products or closing deals within a timeframe. Our calculator supports both tiered accelerators and bonus thresholds so you can model your total compensation accurately.
Effective Commission Rate Explained
When working with tiered commission structures, your effective commission rate is the blended percentage across all tiers. It is calculated by dividing total commission earned by total sales. For instance, if you earn $5,000 on the first $100,000 at 5% and $10,000 on the next $100,000 at 10%, your total commission is $15,000 on $200,000 in sales—an effective rate of 7.5%. This metric is useful for comparing different compensation plans and understanding your true earning power. For small teams looking to manage compensation and HR in one place, dedicated software can automate these calculations across your entire sales team.
Frequently Asked Questions
What is a commission calculator?
A commission calculator is a tool that computes how much a salesperson earns from their sales. It takes into account the base salary, total sales amount, commission rate, and any tiered structures or bonuses to determine total compensation.
How do tiered commission structures work?
Tiered commission structures pay different rates based on sales volume. For example, you might earn 5% on the first $100,000 in sales and 10% on everything above that. Each tier applies only to the sales within its range, similar to how progressive tax brackets work.
What is OTE (On-Target Earnings)?
OTE stands for On-Target Earnings and represents the total compensation a salesperson can expect when they meet 100% of their sales quota. It includes both the base salary and the expected commission at target performance.
What is an effective commission rate?
The effective commission rate is the total commission earned divided by total sales, expressed as a percentage. With tiered structures, the effective rate blends all tiers together into a single number that shows your overall commission percentage.
What's a typical commission rate for sales roles?
Commission rates vary widely by industry. SaaS sales reps typically earn 8-12% commission, real estate agents earn 2.5-3% per side, insurance agents earn 5-20% on new policies, and retail sales roles earn 1-10%. Rates depend on the product, deal size, and sales cycle length.
How do commission bonuses and accelerators work?
Commission bonuses are extra payments triggered when a salesperson exceeds a sales threshold. Accelerators increase the commission rate once quotas are met—for example, jumping from 10% to 15% after hitting target. These incentives motivate overperformance and are common in SaaS and enterprise sales.
