Commission Calculator

Commission ties part or all of an employee’s pay directly to the revenue or sales they personally generate, rather than to hours worked or a fixed salary alone. The underlying logic is incentive alignment: an employer wants more sales, a commissioned employee is paid more for delivering them, and both sides’ interests point the same direction in a way a flat salary alone does not achieve as directly.

Commission plans vary considerably in how the rate is applied and when it is paid out.

"On-target earnings," usually abbreviated OTE, is the total pay — base salary plus commission — a salesperson would earn by hitting exactly 100% of their assigned quota. It is the figure most often quoted in job postings, but it is a projection built on meeting quota, not a guarantee, and actual earnings for any individual can land well above or below it depending on performance.

Commission structures are especially common in roles where individual performance is directly measurable and meaningfully variable — real estate, insurance, business-to-business sales, financial services, and much of retail sales. Roles with longer sales cycles or more collaborative, team-based selling tend to blend commission with a larger guaranteed base, since attributing a single sale to one person’s effort becomes harder.

For an employee, commission offers uncapped upside compared with a fixed salary, at the cost of income that can vary significantly month to month based on factors not always within their control — market conditions, seasonality, or the length of a sales cycle. For an employer, commission-based pay scales cost with revenue rather than being a fixed overhead, which is attractive from a cash-flow perspective, but it also makes payroll costs harder to forecast precisely and can create pressure that pushes toward short-term sales at the expense of long-term customer relationships if the plan is not designed carefully.