Commission Calculator: Flat, Tiered, Draw and Overtime on Commission

How do I calculate commission?

Commission is sales times the commission rate. A $20,000 sale at 8% pays $1,600.00, because 20,000 × 0.08 = 1,600. If the plan pays on gross profit instead of revenue, use the profit as the sales figure: 8% of $10,000 gross profit is $800.00. Base pay, if there is any, is added on top.

Tiered commission: two ways it can work

A tiered plan pays higher rates at higher sales. The plan has to say whether each rate applies only to the sales inside its band, or the rate of the tier reached applies to all sales. With 5% to $50,000, 8% from $50,000 and 10% from $100,000, sales of $120,000 pay $8,500 when each rate covers only its band ($2,500 + $4,000 + $2,000), and $12,000 when 10% applies to everything. The calculator shows both so you can match your plan.

Quota and split

A quota plan pays one rate up to the quota and another above it. With a $50,000 quota, 5% below and 8% above, sales of $70,000 pay $2,500 on the first $50,000 plus $1,600 on the $20,000 above it, $4,100 in all. A split divides one commission between people: a $1,000 commission split 60/40 is $600 and $400.

Is commission included in overtime pay?

Yes, for employees covered by the overtime rules of the Fair Labor Standards Act. Under 29 CFR 778.117, commissions are part of the regular rate however they are figured, whether they are the only pay or paid on top of a salary or hourly wage, and whether they are paid weekly, monthly or later. Overtime is then based on that regular rate, not on the base wage alone. This tool applies the federal method; some jobs are exempt from overtime, and state rules can add to it.

Commission paid for the same week

Under 29 CFR 778.118, the commission is added to the week’s other pay, and the total is divided by the hours worked to get the regular rate. If the straight-time pay already covers every hour, only an extra half of the regular rate is owed for each overtime hour. A worker paid $10 an hour who works 46 hours and earns a $138 commission has a regular rate of ($460 + $138) ÷ 46 = $13.00. The overtime premium is half of that for 6 hours, $39.00, so the week pays $637.00. A commission-only worker who earns $920 in 46 hours has a regular rate of $20.00 and is owed a $60.00 premium.

Commission paid monthly or later

When the commission cannot be worked out by payday, the employer can pay overtime without it and owe the extra once the amount is known (29 CFR 778.119). When it cannot be tied to the weeks it was earned, 29 CFR 778.120(a) allows spreading it equally over the weeks: a monthly amount times 12 divided by 52, or a semi-monthly amount times 24 divided by 52. The regulation’s example is a $416 monthly commission, which is $96 a week. In a 48-hour week with 8 overtime hours, $96 ÷ 48 = $2.00 more regular rate, half of that is $1.00, and $1.00 × 8 hours is $8.00 owed. Over four weeks of 44, 40, 44 and 48 hours the extra comes to $16.72.

Another method in the same section (778.120(b)) divides the commission by all the hours in the period and takes half of that for each overtime hour. A $192 commission over 96 hours with 16 overtime hours is $2.00 an hour, half is $1.00, so $16.00 is owed.

What is a draw against commission?

A draw is money paid before commission is earned. In a recoverable draw it is an advance: commission earned first pays back the draw and any balance carried in, and a shortfall carries forward. With a $2,000 draw and $1,500 earned, the worker is paid $2,000 and $500 carries forward; next period, $3,000 earned against the $2,000 draw and that $500 balance pays $2,500 and clears it. In a non-recoverable draw the worker keeps the draw and is paid commission only above it, so $1,500 earned pays the $2,000 draw and $3,000 earned pays $3,000. Whether an employer may take back an unearned draw from wages depends on the agreement and state law; the calculator shows only the arithmetic.

How is commission taxed?

Commission is wages. When it is paid separately from regular pay it is supplemental wages, and the employer can withhold a flat 22% federal income tax (IRS Publication 15), plus Social Security at 6.2% and Medicare at 1.45%. On a $1,600 commission that is $352.00 federal, $99.20 Social Security and $23.20 Medicare, leaving about $1,125.60 before state tax. If it is paid with regular pay, the employer may figure withholding on the combined amount instead. This is withholding, not your final tax; your tax return settles that.

How do I calculate a real estate or gross profit commission?

Use the sale price, or the gross profit, as the sales figure and your rate as the percent. A $400,000 sale at 3% is $12,000. If the office keeps part of it, split the amount: a $12,000 commission split 70/30 between the agent and the office is $8,400 and $3,600. Rates, splits and fees are set by your agreement; the calculator does not assume any.