Tiered Commission Calculator
Marginal tiered sales commission across four brackets with an accelerator on the top tier — plus the effective rate, the marginal rate and the gap to the next tier.
Tiered Commission Calculator: with the default inputs, commission earned is $51,000.00.
Total booked sales for the commission period — the whole figure, not just the amount above quota.
Often set at quota, so the accelerator above it rewards over-attainment.
Multiplier applied to the top-tier rate only. 1.5× on a 9% rate pays 13.5% on every dollar above tier 3.
- In words
- $850,000 of sales earns $51,000.00 across 4 tier(s) — an effective 6%, with the next dollar paying 13.5%.
- Total pay for the period
- $51,000.00
- Payable after the draw
- $51,000.00
- Effective commission rate
- 6%Commission ÷ sales. Always lower than the top-tier rate, because only the last slice earns it.
- Rate on the next dollar
- 13.5%
- Next tier starts at
- —
- Sales still needed to reach it
- —
- From tier 1
- $7,500.00
- From tier 2
- $12,500.00
- From tier 3
- $17,500.00
- From the accelerated top tier
- $13,500.00
- Worth of the accelerator
- $4,500.00Extra commission the multiplier adds over the plain top-tier rate.
Assumptions
- Tiers are marginal: each rate applies only to the sales inside its band.
- The accelerator multiplies the top tier's rate only.
- Thresholds are dollar amounts, not percentages of quota; a limit lower than the tier below it is raised to match.
- The draw is recoverable and is netted against commission earned this period.
- No splits, overrides, product multipliers, ramp periods, clawbacks or caps.
| Band | Rate | Sales in the band | Commission |
|---|---|---|---|
| $0 – $250,000 | 3% | $250,000 | $7,500.00 |
| $250,000 – $500,000 | 5% | $250,000 | $12,500.00 |
| $500,000 – $750,000 | 7% | $250,000 | $17,500.00 |
| Above $750,000 (accelerated) | 13.5% | $100,000 | $13,500.00 |
Marginal, like tax brackets: crossing into a higher tier lifts the rate only on the dollars above the threshold, never on the whole amount.
How this is worked out
The formula
Marginal tiers, applied like tax brackets: Tier 1 commission = min(sales, L1) × r1 Tier 2 commission = clamp(sales − L1, 0, L2 − L1) × r2 Tier 3 commission = clamp(sales − L2, 0, L3 − L2) × r3 Top tier = max(0, sales − L3) × r4 × accelerator Total commission = the four tiers added together Effective rate = total commission ÷ sales Marginal rate = the rate of the tier the current sales figure sits in Payable now = max(0, commission − recoverable draw)
Open How it’s calculated above to see this worked through with your own numbers.
What you enter
- Sales in the period
- Total booked sales for the commission period — the whole figure, not just the amount above quota.in dollars · 0 or more · defaults to 850000
- Tier 1 up to
- A number.in dollars · 0 or more · defaults to 250000
- Tier 1 rate
- A number.a percentage · from 0 to 100 · defaults to 3
- Tier 2 up to
- A number.in dollars · 0 or more · defaults to 500000
- Tier 2 rate
- A number.a percentage · from 0 to 100 · defaults to 5
- Tier 3 up to
- Often set at quota, so the accelerator above it rewards over-attainment.in dollars · 0 or more · defaults to 750000
- Tier 3 rate
- A number.a percentage · from 0 to 100 · defaults to 7
- Rate above tier 3
- A number.a percentage · from 0 to 100 · defaults to 9
- Accelerator on the top tier
- Multiplier applied to the top-tier rate only. 1.5× on a 9% rate pays 13.5% on every dollar above tier 3.from 0 to 10 · defaults to 1.5
- Base salary for the period(under More options)
- Guaranteed pay covering the same period as the sales figure, so the total is on-target earnings.in dollars · 0 or more · defaults to 0
- Recoverable draw already paid(under More options)
- An advance against commission. It's deducted from what's owed; anything unearned is carried forward.in dollars · 0 or more · defaults to 0
What you get back
- Commission earnedmain answer
- In words
- Total pay for the period
- Payable after the draw
- Effective commission rate
- Commission ÷ sales. Always lower than the top-tier rate, because only the last slice earns it.
- Rate on the next dollar
- Next tier starts at
- Sales still needed to reach it
- From tier 1
- From tier 2
- From tier 3
- From the accelerated top tier
- Worth of the accelerator
- Extra commission the multiplier adds over the plain top-tier rate.
What this assumes
- Tiers are marginal: each rate applies only to the sales inside its band.
- The accelerator multiplies the top tier's rate only.
- Thresholds are dollar amounts, not percentages of quota; a limit lower than the tier below it is raised to match.
- The draw is recoverable and is netted against commission earned this period.
- No splits, overrides, product multipliers, ramp periods, clawbacks or caps.
About this calculator
A tiered commission plan pays a higher rate on each successive slice of sales — the same marginal structure as tax brackets, and misunderstood in exactly the same way. Crossing into a 9% tier does not repay all your sales at 9%; it pays 9% on the dollars above the threshold and leaves everything below on the rates it already earned. That is why the effective rate is always well below the headline top rate: $850,000 of sales here earns $51,000, an effective 6.0%, even though the last dollar pays 13.5%.
If your plan pays one flat rate on everything, use the flat commission calculator instead — it handles a single rate, a simple threshold and a split.
The accelerator
The accelerator is the multiplier on the top tier, and it exists to make the last stretch of the year worth working for. A 1.5× accelerator on a 9% top rate pays 13.5% on every dollar past the top threshold. Set the top threshold at quota and the message to the rep is unambiguous: everything after quota is worth half again as much. The worth of the accelerator output prices it — here it adds $4,500 to a $51,000 cheque.
Accelerators below 1 are decelerators, and plans that quietly taper the rate at the top are the most reliable way to stop a rep closing deals in December. They also invite sandbagging: pushing a deal into next quarter is rational when this quarter's marginal rate has collapsed.
How to use it
Set the three thresholds and four rates to match your plan document. Under More options, add a base salary to see on-target earnings, and a recoverable draw if the rep has already been advanced against commission — the draw is deducted from what's owed, and any unearned balance carries forward.
Watch two outputs in particular. The marginal rate is what the next dollar actually pays, which is the number that drives behaviour. Sales still needed to reach the next tier is the number to put in front of a rep in the last week of a quarter; it's usually more motivating than the total.
Designing a plan that works
- Thresholds should be reachable. A tier nobody hits is not an incentive, it's a rounding error in the model.
- The effective rate is your real cost. Model it at 80%, 100% and 130% of quota before you sign anything: a generous accelerator plus a soft quota is how commission plans blow through their budget.
- Decide what "sales" means and write it down. Bookings, invoiced revenue, or cash collected produce very different numbers and very different behaviour. So does the treatment of discounts, refunds and churn — many plans commission on gross bookings and then claw back on cancellation.
- Cap with care. Caps protect the budget and reliably stop your best rep selling once they're hit.
What this doesn't model
Split deals between reps, team overrides, per-product multipliers, quota attainment measured as a percentage rather than in dollars, ramp periods for new hires, and clawback schedules. Those are all real and all plan-specific. This computes the core arithmetic — marginal brackets plus an accelerator — correctly, which is where most spreadsheets get it wrong.
Frequently asked questions
▸Do higher commission tiers apply to all my sales or just the amount above the threshold?
Just the amount above, in every plan modelled here. Tiers are marginal, like tax brackets. A few plans are written as retroactive or 'cliff' tiers that re-rate the whole amount — read the plan document, because the difference is large.
▸What is a commission accelerator?
A multiplier on the top tier's rate, usually switched on above quota. A 1.5× accelerator on a 9% rate pays 13.5% on every dollar past the threshold, so over-attainment is worth disproportionately more than the base plan.
▸Why is my effective rate lower than my top tier rate?
Because only the last slice of sales earns the top rate. At $850,000 with tiers at 3/5/7/13.5%, the blended result is 6.0%. The effective rate is what the plan costs the company; the marginal rate is what drives the rep.
▸What's the difference between a recoverable and a non-recoverable draw?
A recoverable draw is an advance against future commission — unearned amounts carry forward and are netted off later cheques. A non-recoverable draw is a guaranteed minimum that is never repaid. This calculator treats the draw as recoverable.
▸Should a commission plan have a cap?
Only if you're prepared for your best rep to stop selling at the cap, which is what reliably happens. Most plans handle windfalls with a lower rate above a very high threshold, or a case-by-case review, rather than a hard ceiling.
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