The base calculation, and the tiered version
A flat plan applies one rate to all sales. A tiered plan applies a higher rate only to the sales above each threshold — not to the whole total — so the extra rate is earned band by band. Any base salary is added on top of the commission.
Tiered, worked band by band
| Sales band | Rate | Commission |
|---|---|---|
| $0 – $50,000 | 5% | $2,500 |
| $50,000 – $150,000 | 8% | $8,000 |
| Above $150,000 | 12% | $6,000 |
| $200,000 total | — | $16,500 |
Only the dollars inside each band get that band's rate. Applying 12% to the whole $200,000 would overpay by more than $7,000.
Typical rates by industry
| Industry | Typical range |
|---|---|
| Retail | 2–7% |
| Insurance | 8–15% |
| Manufacturing / B2B | 8–16% |
| Tech / SaaS | 7–50% |
| Financial services | 1–7% |
Round only at the end. Rounding each band separately, or forgetting returns and clawbacks, is where payouts drift out of line.
Common questions
How do I calculate a tiered commission?
Split the sales into bands and apply each band its own rate, then add them up. You do not take one rate on the whole amount. On $200,000 with 5% up to $50k, 8% to $150k and 12% above, that is $2,500 + $8,000 + $6,000 = $16,500.
Can I get a base salary and commission together?
Yes, and it is common. Total pay is the commission plus the base. A $2,000 base with 5% on $40,000 in sales pays $2,000 + $2,000 = $4,000 for the period.
What happens to commission if a customer returns the product?
It is usually clawed back, in full or in proportion to the refund. Record the return before the final payout so the commission reflects the real, kept sale.
