How Commissions Are Calculated

1. Straight percentage

The simplest structure: commission = sale amount × rate. A 5% plan pays $500 on a $10,000 sale, every time, regardless of volume. Real estate, roofing, and many distribution jobs work this way. The only questions worth asking are what counts as the sale amount (contract value? collected revenue?) and when it pays (at signing? at collection?).

2. Tiered commission

The rate changes as your volume passes thresholds. Two very different flavors share the name:

• Marginal tiers — each rate applies only to the slice inside its bracket, like income tax. Selling $150k on a plan that pays 5% to $100k and 8% above pays $5,000 + $4,000 = $9,000.
• Retroactive (cliff) tiers — reaching a threshold applies the higher rate to everything. The same $150k at a retroactive 8% pays $12,000. These plans create huge end-of-period incentives: one more sale can re-rate your whole month.

Plans rarely label which flavor they are — it hides in the plan document's wording. If a single sale near a threshold changes your whole payout, it's retroactive.

3. Gross-margin commission

You're paid a percentage of the profit, not the revenue: commission = (sale price − cost basis) × rate. Car sales is the famous example (20–30% of front-end gross after the pack), and solar's redline model is the same idea per watt. Margin plans make discounting expensive for you, which is exactly why companies use them.

4. Draw against commission

A draw is an advance, not a salary. You're paid a fixed amount each period; your earned commissions repay it. With a recoverable draw, falling short creates a balance you owe against future months. A non-recoverable draw resets each period — a shortfall isn't carried forward. New reps should always ask which kind they're signing.

5. Quota / OTE plans

Common in tech and B2B: your offer letter quotes an OTE (on-target earnings) split into base + variable. The variable pays proportionally to quota attainment — at 80% of quota you earn roughly 80% of the variable — with accelerators above 100% (rates like 1.5× on the overage) and sometimes decelerators below a floor.

Then the deductions apply

Whatever the structure computes is the gross commission. Splits, house fees, chargebacks, and taxes all come out after — the gross vs net guide walks the full waterfall, and the calculators run the numbers for specific industries.

And if your plan mixes structures — a tiered rate on margin with a quarterly bonus, paid on collection — that's precisely the bookkeeping the Controlla app exists to do automatically.