How to Calculate Accumlative Commissions

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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

References

  • Photo Credit Robert Kirk/Photodisc/Getty Images
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