Short answer
On the same $150,000 of sales, a flat 5% pays $7,500, a 5%/8% quota plan pays $9,000, and a $4,000 base plus 3% pays $8,500. The structure changes the pay, not just the rate.
1. Four common structures
| Structure | How it works | Pay on $150,000 |
|---|---|---|
| Flat rate | Rate × sales (5%) | $7,500 |
| Quota with over-quota rate | 5% up to $100,000, 8% above | $9,000 |
| Tiered (marginal) | 5% to $100,000, 3% to $300,000, 2% above | $6,500 |
| Base plus commission | $4,000 base + 3% of sales | $8,500 |
2. Flat rate
Commission = sales × rate. It is simple, but it pays the same rate on the first and last dollar.
3. Quota and over-quota
A base rate up to the quota and a higher rate above it rewards beating the target.
4. Tiered (marginal)
Each rate applies only to the sales inside its band, like tax brackets, so crossing a threshold never lowers pay. The Commission Calculator's Tiered setting works this way.
5. Base plus commission
A fixed salary plus a percentage. A $50,000 base plus 4% on $600,000 is $74,000 a year. On-target earnings (OTE) is base plus the variable pay at quota.
6. Commission on margin, not revenue
Some companies pay on gross margin so the business keeps enough on each deal. A 10% commission on a $100,000 deal with $40,000 of margin pays $10,000 on revenue but $4,000 on margin.
7. Frequently asked questions
What is a tiered commission?expand_more
Each rate applies only to the portion of sales within its band, like marginal tax brackets.
What is base plus commission?expand_more
A fixed salary plus a percentage of sales.
What does OTE mean?expand_more
On-target earnings: base pay plus the variable pay earned at quota.
How do I calculate commission above quota?expand_more
Pay the base rate up to quota and the higher rate on the excess.
8. Sources
- menu_bookeBay: Selling fees
- menu_bookPayPal: Business fees
- menu_bookIRS Publication 15 (Employer's Tax Guide)