How a flat commission is worked out
A commission is a percentage of a sale, paid to whoever brought the sale in rather than whoever made the product. The arithmetic could not be simpler: multiply the sale amount by the rate, and that is the commission. What is left once the commission is deducted stays with the seller, sometimes called the principal, the party who owned whatever was sold and instructed someone else to sell it on their behalf.
Sell a £250,000 house at a 1.5% commission rate and the commission comes to £3,750, leaving £246,250 for the seller before any other costs. The same sum works identically whether the sale is a house, a car, an insurance policy or a stack of advertising space; only the rate and the size of the sale ever change.
Splitting a commission between two sides
A single commission rarely belongs to one person outright. Estate agency is the clearest example: a seller instructs one agent, that agent's fee is the whole commission, but if a different agent introduces the buyer, the two typically divide it, commonly around half each, though the exact split is negotiated case by case. The same idea appears wherever a deal passes through more than one hand: an agent splitting with their brokerage, a referral partner taking a cut, or a team splitting a bonus pool.
On that same £3,750 commission, a 50% split leaves £1,875 for each side. The split is applied to the commission itself, never to the original sale amount, which is why the two shares always add back up to the full commission and nothing more.
Base salary plus commission: on-target earnings
On-target earnings, usually shortened to OTE, is a sales-compensation term for the total pay a role is designed to produce: a guaranteed base salary plus the commission a salesperson would earn across a full year by hitting target, no more and no less. It is a projection built into a job offer, not a promise, since actual pay still depends on what is actually sold.
This calculator's combined-earnings row borrows the same idea on a smaller scale: switch it on, add a base salary, and it adds that base to whatever commission the sale above works out to. A £30,000 base plus a £3,750 commission comes to £33,750 combined, an illustration of one deal against a base salary rather than a full annual OTE, which would need every commission earned across the year added in, not just one sale's worth.
Tiered commission: marginal versus cliff
A tiered commission plan pays a higher rate the more revenue someone brings in, structured as a series of bands. How those bands actually pay out splits into two genuinely different, both widely used structures, and mixing them up changes the total commission substantially.
Marginal, sometimes called incremental or bracket-style, pays each band's own rate only on the slice of revenue that falls inside that band, exactly the way income tax brackets work. Revenue that spills into a higher band does not drag the earlier revenue up to the higher rate with it; only the new slice earns the new rate.
Cliff, also called retroactive or an accelerator cliff, pays one single rate on the entire revenue figure, whichever band that revenue has reached. Cross into a higher band by even a small amount and the higher rate applies retroactively to everything, not just the new slice, which is why it is called a cliff: one more pound sold can be worth far more than the pound itself.
Take £120,000 of revenue against bands of 3% up to £50,000, 5% from £50,000 to £100,000, and 8% above that. Marginal commission is £1,500 plus £2,500 plus £1,600, a total of £5,600, an effective rate of about 4.67%. Cliff commission on the same £120,000 is a flat 8% on everything, £9,600, nearly £4,000 more from identical bands and identical revenue. Marginal is the more common structure in practice, precisely because it keeps payouts predictable; cliff can spur a genuine end-of-period rush to cross a threshold, but it is costlier and harder to forecast.
The boundary itself is worth a mention, since the two structures treat it differently. At exactly £50,000, marginal counts that pound as the last one inside the lower band, since nothing has been sold past the line yet: the result is £1,500, wholly at 3%. Cliff treats reaching a threshold as having made it into the next tier, so the same £50,000 earns £2,500 at a flat 5%. Neither is a mistake; they are two genuine ways a comp plan can be written, and this calculator computes both from the same bands so the difference is visible rather than assumed.
Where commission percentages actually run
Commission rates vary enormously by industry and by country, and estate agency is a well-documented example of just how much. In the UK, sole-agency fees typically run around 1–2% of the sale price plus VAT (VAT itself currently adds 20%), climbing toward 3% or a little more for a multi-agency instruction where more than one agent competes for the sale; market averages tend to sit a little under 1.5% including VAT, though it is always worth checking a specific quote rather than assuming the average applies.
In the United States, the traditional picture has been higher: a total commission around 5–6% of the sale price, historically split roughly evenly between the seller's listing agent and the buyer's agent. That shifted in 2024, when a nationwide settlement involving the National Association of Realtors changed how buyer-agent commissions are agreed, so a seller's listing no longer fixes what the buyer's agent is paid; it is negotiated separately between the buyer and their own agent instead. Early data since the change suggests overall rates have moved only modestly, so treat both figures here as a general, hedged picture rather than a quote for any specific sale, and check current rates directly for a real transaction.
Draw against commission
A draw against commission is a guaranteed regular payment made against commission a salesperson is expected to earn later in the period, smoothing out the naturally lumpy income of a commission-heavy role, particularly while someone is new to a territory or a long sales cycle means deals close slowly. A recoverable draw is a genuine advance, clawed back from future commission if earnings fall short; a non-recoverable draw is closer to a floor, kept regardless, with any shortfall absorbed by the business. Either way, a draw changes the timing and reliability of pay, not the commission formula itself.
Commission is gross, not take-home pay
Every figure this calculator produces is gross, before tax, national insurance or social security, pension contributions, or any other deductions. A commission of £3,750 is not £3,750 landing in a bank account; what actually reaches the person who earned it depends on their tax position and country. Treat every number here as a starting point, not the final answer, and check a payslip or a qualified adviser for what a commission is actually worth after deductions.
Choosing your inputs and reading the results
On the flat tab, the sale amount and the rate drive the commission itself; the split and combined-earnings toggle are optional extras that can stay off for a plain, single-party commission. On the tiered tab, enter the revenue the bands apply to and edit the bands to match a real comp plan; they sort by their starting point automatically, whatever order they are entered in, and any gap or overlap gets flagged and sensibly resolved rather than silently miscalculated. The tier table and bar chart update to match whichever structure is selected, so switching marginal against cliff is the fastest way to see how much difference the structure alone makes to an identical set of bands.
Questions people ask
Is commission paid before or after tax?
Before. Every figure here is gross pay, agreed before tax, national insurance, social security or pension deductions. What reaches a bank account is normally less, depending on the recipient's own tax position and country.
What is the difference between marginal and cliff (retroactive) tiers?
Marginal pays each band's own rate only on the slice of revenue inside it, like income tax brackets. Cliff pays one single rate on the whole revenue figure, whichever band it has reached, so crossing into a new band retroactively lifts everything already sold along with it. Marginal is the more common structure because it keeps payouts predictable.
Why does the same £50,000 in revenue give a different answer under each structure?
The two structures treat a boundary figure differently. Marginal counts revenue sitting exactly on a boundary as the last pound of the lower band. Cliff treats reaching the threshold as already qualifying for the next band, so the same figure earns the higher rate on everything. Both are genuine, honestly computed answers to two different questions.
What is a draw against commission?
A regular advance paid against commission still to be earned in the period. A recoverable draw is clawed back from future commission if earnings fall short; a non-recoverable draw is kept regardless. It changes when and how reliably someone gets paid, not the commission formula itself.
What does on-target earnings (OTE) actually mean?
A base salary plus the commission a role is designed to pay at full target across a year. It is a projection assuming target is hit exactly, not a guaranteed amount. This calculator's combined-earnings row is a simplified, single-deal version of the same idea.
How much do estate agents typically charge, UK versus US?
In the UK, sole-agency fees typically run around 1–2% of the sale price plus VAT, rising toward 3% or more for multi-agency. In the US, the traditional total has run around 5–6%, split between the seller's and buyer's agents, though a 2024 settlement changed how buyer-agent commission is agreed. Both are general pictures, not a quote for any specific sale.
What happens if my tiers overlap or leave a gap?
Bands sort by their starting point automatically. An overlap is trimmed so the earlier band stops where the next one begins, so nothing is counted twice. A genuine gap is left uncovered and flagged, since that stretch of revenue is not part of any band's rate.
This calculator illustrates how flat and tiered commission structures are worked out from figures you enter. It is not advice on any specific comp plan, contract, brokerage split or tax position, all of which vary by employer, industry and country and are worth confirming directly before relying on a result.