Calculate the commission amount or percentage using the calculator below.
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How to Calculate Commission
There are many different industries that are heavily reliant on the use of commission. In fact, in some industries that are very sales intensive, commission might account for the entirety of a worker’s earnings in any given year.
Some of the most common industries that are commission-focused include the real estate industry, the car industry, and many other types of sales-based industries. In these industries, the use of commission creates clear incentives: the more a person is able to sell, the more they will earn.
As we explain in this guide, calculating commission is actually pretty easy.
What is Commission?
The term “commission” can be used to describe any earnings that are accrued as a result of making a sale. But when a salesperson sells a widget for $10, it is very unlikely that they will get to keep all $10 (unless they are working for themselves and have not accrued any expenses).
Instead, the amount they get to keep will usually be determined by a set commission percentage. Typical commission percentages will vary by industry and will also vary by employers within each industry.
In some cases, there might even be a commission cap that limits potential earnings.
Sales commissions are one part of the markup in a product or service.
To calculate commission, you need to identify the value of the sale (sale price) as well as the commission percentage that applies to the sale. Then you can plug these figures into the following formula:
commission amount = sale price × commission percentage
So, suppose a realtor sells a $400,000 home and the commission percentage they collect for selling the home is 3%. In this example:
commission amount = $400,000 × 0.03
commission amount = $12,000
How Much Does a Realtor Make?
Real estate is one of many industries in which commissions account for the vast majority of an agent’s annual income, which means there can be substantial variation in how much a realtor can potentially make.
According to the Bureau of Labor Statistics (BLS), the median real estate agent makes about $48,000 per year, but the top ten percent of real estate agents make more than $100,000 per year.
Average Sales Compensation Package
Sales compensation packages vary tremendously by industry. Realtors typically make about 3% for closing a sale, but because the products they are selling (homes) are very expensive, they can still earn a decent commission.
Other industries selling less expensive items, such as retail, might end up paying 20% commissions or even more.
Working on commission will have its fair share of both pros and cons. The benefit of working on commission is that you can potentially earn quite a bit of money, as long as you keep making sales.
The main drawback, on the other hand, is that this money is not guaranteed, which can be stressful in certain situations. Nevertheless, it is still very useful to know how to calculate commission.
- U.S. Bureau of Labor Statistics, Occupational Employment and Wage Statistics, https://www.bls.gov/oes/current/oes419022.htm