How to Calculate Commissions Sales

Many companies choose to implement a commissioned pay structure for certain employees, usually in sales-related positions. Offering employees commission on sales can create incentive for employees to go the extra mile to make a sale or push harder to gain new clientele. Sales commissions are calculated and paid at the end of a specified period, such as monthly or quarterly. Management assigns a commission percentage to each employee that payroll employees use to calculate the sales commission.

Things You'll Need

• Percentage sales commission per employee
• Sales figures per employee

Instructions

1. Obtain a list of the percentage sales commission for each commissioned employee.

2. Obtain the sales figures for each of the commissioned sales people. The sales figures should be reviewed and approved by management prior to preparing commission checks.

3. Multiply the amount of sales for the employee by the employee’s sales commission percentage. For example, if the employee sold $40,000 worth of product and makes 5 percent in commission, then the commission is $2,000 ($40,000 times .05).

4. Input the calculated commissions into your regular payroll processing system so that the appropriate taxes are withheld from the commissioned pay.

Tips & Warnings

• In order to avoid mistakes, perform all the commissioned calculations using spreadsheet software, such as Microsoft Excel, and have management review and approve the commissions before inputting the amounts into the payroll system.

References

• “Principles of Accounting”; A. Douglas Hillman, Richard F. Kochanek, Corine T. Norgaard; 1991