Free small business calculator
Tiered Commission Calculator
Calculate tiered commission payouts with progressive rates. See each tier's earnings, total commission, net payout after draw, and effective rate.
Enter the minimum numbers needed to get a result.
Updated live as you type.
Planning estimate only. It does not include taxes, overhead allocation, depreciation, discounts, or other business-specific adjustments.
What this calculator means
Tiered Commission: A tiered commission structure applies progressively higher commission rates as sales volume crosses pre-defined thresholds, incentivizing higher performance. It's the most common commission model in B2B sales.
Formula and example
Tier 1 = min(Total Sales, T1) × R1; Tier 2 = min(max(0, Total Sales − T1), T2 − T1) × R2; Tier 3 = max(0, Total Sales − T2) × R3; Total Commission = T1 + T2 + T3; Net Payout = Total Commission − Base Salary; Effective Rate = Total Commission / Total Sales × 100
$150,000 total sales at 5%/8%/12% tiered rates with $30,000 base salary: Tier 1 ($0–50K at 5%) = $2,500. Tier 2 ($50–100K at 8%) = $4,000. Tier 3 (above $100K at 12%) = $6,000. Total = $12,500. Net payout (after $30K base) = −$17,500 (draw exceeded — commission didn't cover salary).
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Methodology & assumptions
Last updated: 2026-06-25Calculation method
Calculates tiered commission using three progressive rate bands: Tier 1 applies the first rate to sales up to the first threshold, Tier 2 applies the second rate to sales between thresholds 1 and 2, and Tier 3 applies the third rate to all sales above the second threshold. Base salary/draw is deducted from total commission earned. The effective rate is total commission divided by total sales. Assumes a standard 3-tier structure and that tier thresholds are non-overlapping (T1 < T2).
Data sources
Uses the numbers you enter and standard small-business finance formulas. Benchmark comparisons use HustleFin industry benchmark pages where available.
Limitations
Fixed 3-tier model — some plans use 2, 4, or more tiers, which this calculator does not model. Does not account for quota attainment, accelerators (bonus multipliers above quota), team splits, or clawback provisions. Net payout can be negative if the base salary draw exceeds earned commission (recoverable draw scenario). For planning estimates — adjust for your specific compensation plan.
Input definitions
- Total sales amount: Total sales or deal value to calculate commission on.
- Base salary / draw: Fixed base salary to deduct from earned commission (draw against commission).
- Tier 1: Up to: Sales threshold for first tier rate.
- Tier 1 rate: Commission rate for sales up to this threshold.
- Tier 2: Up to: Sales threshold for second tier rate.
- Tier 2 rate: Commission rate for sales in this tier.
- Tier 3: Above threshold: Commission rate for sales above all tier thresholds.
Frequently asked questions
What is tiered commission?+
Tiered commission applies different rates to different bands of sales. For example: 5% on first $50K, 8% on $50–100K, 12% above $100K. It incentivizes reps to push past each threshold.
How many tiers should I use?+
Most plans use 2–4 tiers. Fewer than 2 is flat-rate. More than 4 becomes confusing for reps. The sweet spot: 3 tiers — baseline rate, target rate, and stretch/accelerator.
What's a typical tiered commission structure for SaaS?+
Common SaaS structure: 8% on first $500K ACV, 12% on $500K–1M, 15% above $1M. Enterprise deals may have separate rates. Accelerators (bonus multipliers) are common above 100% quota.
How does a draw work with tiered commission?+
A draw is deducted from total earned commission across all tiers. If draw exceeds commission, the rep owes the difference (recoverable draw) or the company absorbs it (non-recoverable).
Next: What to do after this
Pick one next action. These are sequenced by the most common workflow after this calculation.
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