Commission Pay Calculator

How commission pay is calculated

Four structures cover almost every commissioned job. Straight commission pays a percentage and nothing else. Base plus commission pays a wage or salary with commission on top, commonly split around 60:40 between the two. A draw against commission advances money before it is earned and recovers it later. Gross-margin commission changes what the percentage applies to rather than how the percentage works. All four run on the same formula: commission equals the commission base times the rate.

The base is where plans quietly diverge. On a revenue basis, a $25,000 month at 5 percent pays $1,250. On a gross-profit basis with $15,000 of cost, the same month pays 5 percent of $10,000, which is $500. Same sales, same rate, less than half the commission. That choice moves the number further than any argument over one or two percentage points, so read which one the plan names before negotiating the rate.

Tiered plans then split two ways, and the two do not pay anywhere near the same. On tiers of 3 percent up to $10,000, 5 percent to $25,000, and 8 percent above that, marginal treatment pays 3 percent on the first $10,000 ($300), 5 percent on the next $15,000 ($750), and 8 percent on the last $5,000 ($400), for $1,450 on $30,000 of sales. Retroactive treatment applies the top rate reached to every dollar: 8 percent of $30,000, which is $2,400. The $950 gap is the same sales figure read two ways. Retroactive plans also create a sharp jump at each threshold, which is part of why they are rarer, and why the calculator makes you pick instead of guessing for you.

How a draw against commission actually works

A draw is an advance, and it behaves like a running balance rather than a one-off payment. Watch it across three periods on a $5,000 monthly draw. Month one earns $4,500 of commission: the rep is paid the $5,000 draw, the whole $4,500 commission goes to repaying it, and $500 stays unrecovered. Month two earns $7,000: the draw of $5,000 plus the $500 carried in makes $5,500 recoverable, so $5,500 comes out of the commission, $1,500 of commission is paid, the check is $6,500, and the balance returns to zero. Month three earns $2,000: recovery takes the full $2,000, the check is the $5,000 draw, and $3,000 now carries forward. The pay is smoothed; the obligation is not erased.

Recoverable draws work that way. Non-recoverable draws do not: the rep keeps the advance no matter what is earned, which turns the draw into a guaranteed floor and is common during a ramp period for a new hire. In non-recoverable form the arithmetic collapses to base pay plus the greater of commission or draw, and no balance ever carries.

Two federal limits apply to recovery. First, taking back a draw cannot push a workweek below minimum wage for the hours actually worked, because wages have to be paid free and clear (29 CFR 531.35). The calculator caps recovery at that floor and leaves the remainder in the balance rather than showing an illegal result. Second, an outstanding recoverable balance cannot be collected after employment ends. The Sixth Circuit in Stein v. hhgregg (2017) allowed a recoverable draw as a way to satisfy minimum wage while holding that requiring repayment post-termination violates the FLSA. State law is often stricter than both rules.

On the stub, all of this needs three slots: the draw as an earnings line, the commission as an earnings line, and the recovery as an after-tax deduction. It goes on the deduction side because the draw was already taxed as wages when it was advanced, which is the same reasoning the pre-tax vs post-tax deduction calculator walks through for other deduction types.

Commissions and the overtime regular rate

This is the part most commission calculators skip. 29 CFR 778.117 is direct about it: commissions "are payments for hours worked and must be included in the regular rate," whether the commission is the only pay or supplements a wage, and no matter how often it is computed or when it is paid. So a commissioned employee who works 45 hours has a regular rate built from wage and commission together, and is owed a premium on the hours over 40.

Work the plain case. $15 per hour, 45 hours, $200 of commission for the week. Straight time on all 45 hours is $675, plus $200 of commission, so the regular rate is $875 divided by 45, or $19.44 per hour. The premium is half of that on 5 overtime hours: $48.61. Gross is $923.61. The premium is one half and not one and a half because the $675 already paid straight time on every hour, overtime hours included, and the commission is already counted in full. Only the extra half remains. Computing 1.5 times the rate at this point is where commission payroll most often goes wrong.

The unit of measurement is the workweek, never the pay period. That matters when commission is paid later than the weeks it was earned in. 29 CFR 778.119 requires paying overtime on the wage first, then apportioning the commission back over the workweeks it was earned in and paying half the resulting rate increase for every overtime hour in those weeks. That corrective payment is the true-up. DOL permits two ways to spread it, both in 778.120: equal per week, and equal per hour. The regulation works both of them itself, and the figures are worth checking your payroll against. A $416 monthly commission converts at $416 times 12 divided by 52, which is $96 per week; on a 48-hour week that raises the rate by $2.00 per hour and adds $8.00 of premium. Allocated per hour instead, $192 of commission over 96 hours with 16 statutory overtime hours is $2.00 per hour and $16.00 of premium. Note the conversion uses 52 weeks divided by the paydays in a year, so a monthly period is 4.333 weeks, not 4 and not 4.5.

Then there is Section 7(i), the reason people believe commission-only means exempt. It does not. Three conditions have to hold together for the exemption to apply: a retail or service establishment, a regular rate above one and one half times the applicable minimum wage in every overtime week, and more than half of total earnings from commissions measured over a representative period of one month to one year. Miss one and time-and-a-half on the regular rate is owed. The calculator shows each condition separately and keeps the premium amount on screen either way. For a worker with no commission at all, the same regular rate arithmetic lives in the hourly to paystub earnings calculator, and the 52-week conversion used here is the same one behind the pay frequency converter.

How commission is taxed and withheld

Commission is wages, so it carries Social Security at 6.2 percent up to the 2026 wage base of $184,500, Medicare at 1.45 percent, and income tax withholding. For federal income tax an employer has two options. It can add the commission to regular wages and withhold under the W-4 as usual, or, when the commission is identified separately, apply the flat supplemental rate of 22 percent, rising to 37 percent on cumulative supplemental wages above $1,000,000 in a year. A flat 22 percent is a withholding convenience, not the tax bill: the real liability settles at filing, so a heavy commission month often produces a refund rather than a permanent loss.

A draw is taxed when it is advanced, not when it is recovered, which is why the recovery belongs on the deduction side of the stub instead of reducing gross pay. Reducing gross would understate wages that were already reported and taxed. This calculator stops at gross pay on purpose and computes no withholding at all. When you need a commission check to land on a specific take-home figure, the gross-up calculator solves the reverse direction with the supplemental rate built in.

Putting commission on a pay stub

The output rows above map one to one onto the fields a real stub needs. Commission and draw are earnings lines with their own year-to-date columns. The overtime true-up gets its own line so the worker can see the premium rather than finding it buried in a single overtime figure. Draw recovery sits in after-tax deductions. Year-to-date matters more than usual here, since the 7(i) commission-share test is measured over a representative period rather than one check, and the YTD earnings calculator rolls a single period into that running total.

Payslip44 builds the document itself. Employer, employee, and line item templates are reusable, so a commissioned employee's stub gets laid out once and then replayed each period with new figures. Year-to-date runs per line, the money math is decimal-precise, and none of it leaves the device. Finished stubs export to PDF, PNG, CSV, or plain text. If the commission in question is the last one, the final paycheck calculator covers what a separation check owes.