Estimates for personal planning — not tax, legal, or payroll advice. Every number above is gross pay unless a line says otherwise; the formula, its boundaries, and its test cases are published below.
How it works
commission = sales × rate
= $85,000.00 × 0.04 = $3,400.00
gross = base + commission
= $1,500.00 + $3,400.00 = $4,900.00
Tiered and graduated commission
Many plans pay a higher rate as you climb. Tiers are marginal, exactly like tax brackets: each rate applies only to the sales inside its band, not retroactively to everything. On a 3% / 5% / 8% schedule with breakpoints at $50,000 and $100,000, sales of $120,000 earn:
next $50,000 × 5% = $2,500.00
last $20,000 × 8% = $1,600.00
total = $5,600.00 // effective rate 4.67%
Note the effective rate (4.67%) sits below the top tier (8%) — a gap plans often blur when they advertise “up to 8%.” The tiered case is one of our published test cases; the calculator above handles the flat-rate form, and the arithmetic for tiers is the block you just read.
Draw against commission
A draw is an advance against future commission, not extra pay. If you draw $2,500 and earn $2,000, you cleared none of it — the $500 shortfall typically carries forward. Enter your draw above to see whether the period cleared it.
Two kinds exist and the difference matters at separation: a recoverable draw is a loan the employer may recoup from future commissions; a non-recoverable draw functions as a guaranteed minimum. Which one you're on should be in writing. Note that draw recovery cannot push your pay below the minimum wage for hours worked in that week.
The overtime rule most commission calculators ignore
If you are non-exempt and earn a nondiscretionary commission — one promised by a plan rather than handed out at management's whim — that commission must be included in your regular rate before overtime is computed (29 CFR §778.117). Your overtime is not 1.5× your base hourly rate; it is 1.5× a rate that the commission raised.
When the commission covers more than one workweek, it is apportioned back across the weeks it was earned in, and additional overtime is owed for each (§778.119). This is one of the most commonly underpaid items in American payroll. Recompute your overtime →
A narrow exception exists for some commissioned retail and service employees under FLSA §7(i), which can exempt them from overtime entirely if more than half their pay is commission and their regular rate exceeds 1.5× the minimum wage.
How commission is taxed
Commission is supplemental wages. Paid separately from your regular wages, your employer may withhold federal income tax at the optional flat rate — 22% for amounts under $1 million in a year (IRS Publication 15). Paid combined with your regular wages, it is usually withheld at your normal W-4 rate instead.
Neither method changes what you ultimately owe — that is settled when you file. A commission-heavy year with flat-rate withholding often produces a refund; the reverse produces a bill.
From the public test suite
assert commission($120,000, tiers 3/5/8%).commission == 5,600.00 ✓
assert commission($40,000 @ 5%, draw $2,500).shortfall == 500.00 ✓
// 36 cases · 96 assertions · runs on every deploy — see all
Sources
Built and maintained by Ethan Chen, independent developer. No credential is claimed that we don't have — what this page offers instead is a published formula and a public test suite.