How the Commission Calculator Works
A commission is pay that depends on what you sell. Instead of, or on top of, a fixed salary, you earn a share of your sales. Sales staff, agents, brokers and many others are paid this way. Commission plans come in different shapes, so the calculator has four modes: a flat rate, tiered rates, a home sale, and a target income.
Mode 1: one commission rate
The simplest plan pays a fixed percentage of your sales:
commission = sales x commission rate / 100 total pay = commission + base pay + bonus
For example, sales of $80,000 at 8% earn a commission of $6,400. With $2,000 of base pay and a $500 bonus, the total is $8,900, which is 11.13% of the sales.
Mode 2: tiered rates
Many plans pay a higher rate as your sales grow, to reward top sellers. This calculator has three tiers, each with its own rate, and two ways to apply them:
- Each rate applies only to the sales in its tier (a marginal plan). The first slice of sales earns the first rate, the next slice earns the second rate, and so on.
- The top tier reached applies to all sales (a retroactive plan). Once you cross a threshold, the higher rate is paid on everything.
Say the tiers are 5% on the first $50,000, 7% up to $100,000, and 10% above that. With sales of $120,000:
| Tier | Rate | Sales in the tier | Commission (marginal plan) |
|---|---|---|---|
| $0 to $50,000 | 5% | $50,000 | $2,500 |
| $50,000 to $100,000 | 7% | $50,000 | $3,500 |
| Over $100,000 | 10% | $20,000 | $2,000 |
| Total | $120,000 | $8,000 |
The marginal plan pays $8,000, an average rate of 6.67%. With the retroactive plan, the 10% rate applies to all $120,000, and the commission is $12,000. Check which one your plan uses, because the difference can be large.
Mode 3: a home sale
Real estate commissions are shared. The seller pays one total commission, a percentage of the price. It is divided between the buyer's and the seller's agents, and each agent then splits their part with their brokerage. Fees may come off after that. The calculator follows these steps:
total commission = sale price x total commission % your side = total commission x your side's share your cut = your side x your share after the split you keep = your cut - fees
Example: a home sells for $400,000, and the total commission is 5%, which is $20,000. Your side gets half, $10,000. You keep 70% of that after the brokerage split, which is $7,000. After a $300 fee, you keep $6,700. That is 1.68% of the sale price, not 5%.
Chart: where the $20,000 commission goes
Other side's agent ████████████████████████████████████████ 50% $10,000 You keep ███████████████████████████ 33.5% $6,700 Your brokerage ████████████ 15% $3,000 Fees █ 1.5% $300
Mode 4: the sales you need for a target income
To reach an income goal, the calculator works backward. It subtracts your base pay and bonus from the goal, and divides what is left by the commission rate:
sales needed = (target income - base pay - bonus) / commission rate
To earn $6,000 at an 8% rate, you need $75,000 of sales. With $3,000 of base pay, you need only $37,500. The calculator also shows the sales needed at other rates, from 5% to 20%.
Tips
- Read your plan carefully. Tiers, caps, clawbacks for returns, and the timing of payments differ from plan to plan.
- Think about taxes. Commission is income, and the amounts shown are before tax. You may also owe estimated tax if you are self-employed.
- Compare plans by total pay, not only by the rate. A lower rate with a base salary can pay more than a higher rate with none.
What this calculator does not include
- Income tax, social security and other deductions.
- Caps on commission, draws against future commission, and clawbacks when sales are returned or cancelled.
- More than three tiers, or plans that pay by the number of items instead of the value of sales.
- Local rules on commission rates. In real estate, the total rate is negotiable.
This tool gives an estimate for general information only. It is not financial or legal advice. Your contract or plan document has the exact terms.