Accumulative commissions offer increasing commissions based on sales volume. An example illustrates this technique best. Perhaps you work for a company that produces "widgets," and the company offers you a 5-percent commission on any sales up to $2,000. As an incentive to produce more sales, the company offers 10-percent commission on volumes from $2,000 to $5,000, and 15-percent beyond that. This is accumulative commission structure is used to motivate salesmen to reach greater rewards.
Define your accumulative commission structure. In the example, it would be:
Tier 1: $0 - $2000: earn 5-percent commission
Tier 2: $2,001 - $5000: earn 10-percent commission
Tier 3: $5001 and over: earn 15-percent commission
Total your sales for a particular commission period. Perhaps you produced $7,000 in sales.
Separate out your volume with respect to your accumulative commission structure.
Tier 1: Your sales volume was greater than $2,000, so total amount in Tier 1, subject to 5-percent commission, is $2,000
Tier 2: Your sales volume was greater than $5,000, so the cap-out in Tier 2 occurs at $5,000. However, you have to subtract the first $2,000, which is only paid 5 percent. So $5,000 minus $2,000 leaves $3,000 in Tier 2, subject to 10-percent commission.
Tier 3: Subtract the total volume by the cap-out of Tier 2, such that $7,000 minus $5,000 leaves $2,000 in Tier 3, subject to 15-percent commission.
Multiply the volume in each tier by their respective percentages, remembering to convert the percentage to decimal format by shifting the decimal point two places to the left. As an example, 5 percent would be 0.05 in decimal format.
Tier 1: $2,000 x 0.05 = $100
Tier 2: $3,000 x 0.10 = $300
Tier 3: $2,000 x 0.15 = $300
Total the commissions earned across all tiers:
Total Accumulated Commission = Tier 1 + Tier 2 + Tier 3
Total Accumulated Commission = $100 + $300 + $300
Total Accumulated Commission = $700
- Photo Credit Robert Kirk/Photodisc/Getty Images
How to Calculate Tiered Gross Margin Commission
Some companies choose to pay sales professionals commission based on the tiered gross margin percentage. This tiered system provides a monetary incentive...
How to Pay Commissions to Your Sales Staff
Flat commission, sliding scale or progressive scale? If you are overseeing a sales staff, here are some suggestions on how to pay...
How to Calculate Interest Rate Per Annum
The interest rate per annum is the total interest rate over one year. If your loan rate is charged per month, you...
How to Figure Out Percentages
To figure out a percentage, turn the percentage into a decimal, then multiply the decimal value by the total. To turn a...
How to Calculate Markdown
Markdown refers to a discount on a product. For example, a product may be originally priced at $150, but during a sale,...
How to Calculate Commission on Gross Sales
Salespeople in many businesses earn a small salary supplemented by a commission. The commission compensates the employee based on a percentage of...
How to Calculate Commissions in Excel
Microsoft Excel can keep track of and calculate your sales commissions. You can also set up a number of different scenarios with...
What Is the Length of Unemployment Benefits in Georgia?
Georgia's unemployment insurance law makes the maximum length of UI benefits dependent on the state's unemployment rate.
How Base Plus Commission Works
The idea behind base plus commission is to encourage a salesperson to get out and make as many sales as possible –...
Difference Between Income Base & Accumulation Value
Income base and accumulation value are two very important terms you'll need to be familiar with. Learn about the difference between income...