Commission Calculator
The Engine of Sales: How Commission Works
In the corporate world, a salary is safe but limited. In the world of sales, Commission is king. It is the ultimate performance-based pay structure: the more value you bring to the company, the more money lands in your pocket.
Whether you are a Real Estate Agent selling million-dollar homes, a Car Salesman moving inventory, or a Software (SaaS) Account Executive closing deals, understanding exactly how your paycheck is calculated is critical for your financial planning.
The 3 Most Common Commission Structures
Not all commissions are calculated simply as "Price Γ Rate." Companies use different models to incentivize behavior.
1. Straight Commission
You eat what you kill. There is no base salary. If you sell nothing, you earn $0.
- Example: Real Estate Agents. You sell a house for $500k, you get 3% ($15k).
- Pros: Usually offers the highest percentage rates.
- Cons: Highly volatile income. Requires a Safety Fund for slow months.
2. Base Salary + Commission
The standard for corporate sales. You get a guaranteed salary (e.g., $50,000/year) plus a smaller percentage of your sales (e.g., 5%).
This offers security while still rewarding high performers. Use our Salary Calculator to see what your base pay looks like after taxes.
3. Tiered Commission (Accelerators)
This is designed to push salespeople to hit targets. The rate increases as you sell more revenue.
- First $100k sold: 5% rate ($5,000)
- Next $100k sold: 7% rate ($7,000)
- Everything over $200k: 10% rate (The "Accelerator")
In this model, hitting your quota isn't just about volume; itβs about unlocking the higher pay bracket where the real money is made.
Real Estate: The "Split" Explained
The most frequent users of commission calculators are home sellers and agents. However, there is a misconception that the agent keeps the entire fee.
Let's break down a typical $500,000 Home Sale with a 6% total commission fee ($30,000).
| Party | Split % | Amount | Notes |
|---|---|---|---|
| Buyer's Agent Brokerage | 3.0% | $15,000 | Half goes to the buyer side. |
| Seller's Agent Brokerage | 3.0% | $15,000 | The listing firm keeps half. |
| The Agent (You) | 1.5% - 2.1% | $7,500 - $10,500 | After splitting with your Broker. |
So on a $15,000 commission check, the agent keeps $10,500 and the broker takes $4,500 for overhead and branding.
Car Sales: The "Draw" System
Automotive sales use a confusing system called a Recoverable Draw.
The dealership pays you a minimum wage "advance" at the start of the month (say, $2,000). You have to earn enough commissions to "pay back" that $2,000 before you see any extra money.
If you earn $3,000 in commissions, you only get a check for $1,000 (because you already got the $2,000 advance). If you have a bad month and earn $0 commission, you owe the dealership that $2,000 out of next month's check.
Gross vs. Net Commission
Remember: The number on this calculator is your Gross Income. It does not include taxes.
Commission is considered "Supplemental Income" by the IRS and CRA. It is often taxed at a flat rate (e.g., 22% Federal in the US) or added to your top marginal tax bracket.
Always set aside 30-40% of your commission check for tax season, or use our Tax Calculator to see your take-home pay.