Can a commission rate be more than 100%?

No. That would mean the salesperson earns more than the price of what was sold. Real rates are usually between 1% and 20%.

Why do some companies use tiered commission?

To reward strong sellers. A higher rate above a certain amount makes every extra sale worth more, so salespeople are motivated to sell beyond the first tier.

How do I know which job offer is better?

Compute the total earnings of each offer for the sales you expect. You can also find the break-even sales, where both offers pay the same: below it the higher base salary wins, above it the higher rate wins.

Teacher Resources

Commission

Learn how salespeople earn commission: find the commission, total earnings with a base salary, the commission rate, the sales needed for a target income and tiered commission.

Intermediate25 minLesson

Printable worksheet

Definition

A commission is money a salesperson earns as a percent of what they sell. The percent is called the commission rate.

Commission is the percent equation you already know,

\text{part} = \text{rate} \times \text{whole}

, where the whole is the sales and the part is the commission:

\text{Commission} = \text{Commission rate} \times \text{Sales}

Many jobs pay a fixed base salary plus commission:

\text{Total earnings} = \text{Base salary} + \text{Commission rate} \times \text{Sales}

Example: a shop assistant earns 1,500 dollars a month plus 4% of sales. With sales of 10,000 dollars the commission is

0.04 \times 10{,}000 = 400

dollars, so the total is

1{,}500 + 400 = 1{,}900

dollars.

Always write the rate as a decimal before you multiply:

4\% = 0.04

Try it now

A salesperson earns a 5% commission. Her sales this week are 2,000 dollars. How many dollars of commission does she earn?

Worked Examples

A real estate agent sells a house for 250,000 dollars. Her commission rate is 3%. How much commission does she earn?

Write the rate as a decimal

$3\% = \frac{3}{100} = 0.03$

Multiply the rate by the sales

$0.03 \times 250{,}000 = 7{,}500$

Check with 1%

$1\%$ of $250{,}000$ is $2{,}500$ , and $3 \times 2{,}500 = 7{,}500$ → Same answer

Answer: The agent earns a commission of 7,500 dollars.

Common Mistakes

Multiplying by the percent number: $3 \times 250{,}000 = 750{,}000$

Why it's wrong: 3% means 3 out of 100, not 3 whole times. The commission can never be bigger than the sales.

Correct: Write the rate as a decimal first: $0.03 \times 250{,}000 = 7{,}500$

Giving only the commission when the question asks for total earnings

Why it's wrong: Total earnings include the base salary. The commission is only the extra part.

Correct: Total earnings = base salary + commission: $1{,}800 + 1{,}200 = 3{,}000$

Using the higher tier rate on all sales: $0.08 \times 15{,}000 = 1{,}200$

Why it's wrong: In tiered commission each rate applies only to its own part of the sales.

Correct: Split the sales: $0.05 \times 10{,}000 + 0.08 \times 5{,}000 = 500 + 400 = 900$

Forgetting to subtract the base salary when finding the sales needed: $\frac{2{,}500}{0.05} = 50{,}000$

Why it's wrong: Only the part of the income above the base salary has to come from commission.

Correct: First subtract: $2{,}500 - 1{,}200 = 1{,}300$ , then $\frac{1{,}300}{0.05} = 26{,}000$

Interactive Visual

Bar Chart

Base salary 1,500 + 4% commission

0(1500 dollars)

5,000(1700 dollars)

10,000(1900 dollars)

15,000(2100 dollars)

20,000(2300 dollars)

Ratio Tape Diagram

Up to 10,000: 5%

5000

= 10,000

Above 10,000: 8%

5000

= 5000

Total sales

= 3 (15,000)

If total is:

Up to 10,000: 5% value:10,000

Above 10,000: 8% value:5000

Interactive Sandbox

Expression Calculator

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Practice Problems

18 problems

Problem 1 of 18

Easy

A salesperson earns a 5% commission. Her sales this week are 2,000 dollars. How many dollars of commission does she earn?

Practice Problems: Commission

1. A salesperson earns a 5% commission. Her sales this week are 2,000 dollars. How many dollars of commission does she earn?
2. A real estate agent sells an apartment for 180,000 dollars. Her commission rate is 3%. How many dollars of commission does she earn?
3. A job pays a base salary plus commission. Which calculation gives the total earnings?
4. A car salesperson earns 2% commission on every car. He sells a car for 24,000 dollars. How many dollars of commission does he earn?
5. A shop assistant earns a base salary of 1,600 dollars a month plus 4% commission. Her sales this month are 15,000 dollars. What are her total earnings in dollars?
6. A car salesperson sells 3 cars at 20,000 dollars each. His commission rate is 1.5%. How many dollars of commission does he earn?
7. A salesperson earns a base salary of 1,400 dollars plus 6% of sales. Her sales are 9,000 dollars. What are her total earnings in dollars?
8. A salesperson earned 360 dollars of commission on sales of 6,000 dollars. What is the commission rate?
9. A car salesperson has a base salary of 1,500 dollars. This month he sold cars for 25,000 dollars and earned 2,250 dollars in total. What is his commission rate?
10. An electronics salesperson earned 1,350 dollars of commission on sales of 45,000 dollars. What is the commission rate?
11. A salesperson earns 1,000 dollars a month plus 8% commission. How many dollars must she sell to earn 1,800 dollars this month?
12. A store pays 4% commission on the first 5,000 dollars of sales and 6% on sales above 5,000 dollars. An employee sells 8,000 dollars. How many dollars of commission does he earn?
13. A real estate agent earns 2.5% commission. She sells a house for 240,000 dollars. How many dollars of commission does she earn?
14. A company pays 5% commission on the first 10,000 dollars of sales and 8% on sales above 10,000 dollars. A salesperson sells 14,000 dollars. What is the commission in dollars?
15. Job A pays 1,800 dollars a month plus 2% of sales. Job B pays 1,200 dollars a month plus 5% of sales. With monthly sales of 30,000 dollars, how many dollars more does the better job pay?
16. Job A pays 1,800 dollars a month plus 2% of sales. Job B pays 1,200 dollars a month plus 5% of sales. At what monthly sales, in dollars, do both jobs pay the same?
17. A real estate agent earns 3% commission. For what house price, in dollars, would she earn 9,000 dollars of commission?
18. A company pays 5% commission on the first 10,000 dollars of sales and 8% on sales above 10,000 dollars. How many dollars must a salesperson sell to earn 1,100 dollars of commission?

Why It Matters

Commission decides the income of millions of people:

Real estate agents often earn 2% to 3% of the price of every house they sell
Car salespeople usually get a base salary plus a percent of each car sold
Shop assistants in electronics or fashion stores often earn a small percent on top of their wage
Job offers in sales are hard to compare without math: is 2,000 dollars plus 3% better than 1,400 dollars plus 5%?

Once you can work with commission, you can check a paycheck, set a sales goal and decide which job offer really pays more.

Real World Applications

Real Estate Agents

When a house is sold, the agent who helped sell it is paid a percent of the selling price.

Example:

On a 400,000 dollar apartment with a 2% commission, the agent earns $0.02 \times 400{,}000 = 8{,}000$ dollars.

1Try It Yourself

An agent sells a house for 320,000 dollars. Her commission rate is 2.5%.

How much commission does she earn, in dollars?

Step 1: Write the mathematical expression

Multiply the selling price by the rate as a decimal:

Comparing Job Offers at a Car Dealership

Sales jobs often mix a fixed base salary with commission. A higher base is safer, a higher rate pays more when sales are good.

Example:

Offer A pays 2,000 dollars plus 3%, offer B pays 1,400 dollars plus 5%. They pay the same when $0.02 \times \text{sales} = 600$ , so at sales of 30,000 dollars. Above that, offer B pays more.

2Try It Yourself

Offer A: 2,000 dollars a month plus 3% of sales. Offer B: 1,400 dollars a month plus 5% of sales. You expect to sell 40,000 dollars a month.

How many dollars more per month does the better offer pay?

Step 1: Write the mathematical expression

Subtract the total of offer A from the total of offer B:

A Shop Assistant's Sales Goal

Shop assistants who earn commission often set a monthly sales target so they reach the income they need.

Example:

With a base of 1,500 dollars and 4% commission, sales of 20,000 dollars give $1{,}500 + 800 = 2{,}300$ dollars (see the bar chart).

3Try It Yourself

A shop assistant earns 1,500 dollars a month plus 4% commission. She wants to earn 1,900 dollars this month.

How much must she sell, in dollars?

Step 1: Write the mathematical expression

Divide the commission she needs by the rate:

Key Takeaways

1Commission = commission rate × sales, the percent equation with the sales as the whole
2Always write the rate as a decimal before multiplying: $3\% = 0.03$ , $2.5\% = 0.025$
3Total earnings = base salary + commission
4Commission rate = commission ÷ sales, then multiply by 100 to get a percent
5Sales needed = (target income - base salary) ÷ rate
6Tiered commission: apply each rate only to its own part of the sales, then add the parts

Frequently Asked Questions

Not quite. Commission is tied to each sale and grows with every dollar sold. A bonus is usually a fixed extra amount paid for reaching a goal.

Glossary

Commission: Money earned as a percent of the sales a person makes
Commission rate: The percent of the sales paid as commission, for example 3%
Sales: The total value of what the salesperson sold, the whole in the percent equation
Base salary: A fixed amount paid no matter how much is sold
Total earnings: Base salary plus commission
Tiered commission: A system where different rates apply to different parts of the sales, for example 5% up to 10,000 and 8% above

Formula Card

Commission

\text{Commission} = \text{rate} \times \text{sales}

Write the rate as a decimal first

Total earnings

\text{Earnings} = \text{base salary} + \text{rate} \times \text{sales}

Fixed pay plus commission

Commission rate

\text{rate} = \frac{\text{commission}}{\text{sales}}

Multiply by 100 to write it as a percent

Sales needed

\text{sales} = \frac{\text{target} - \text{base salary}}{\text{rate}}

Sales that give a target income

Commission

Definition

Worked Examples

Common Mistakes

Interactive Visual

Bar Chart

Base salary 1,500 + 4% commission

Ratio Tape Diagram

Interactive Sandbox

Expression Calculator

History

Practice Problems

Why It Matters

Real World Applications

Real Estate Agents

Comparing Job Offers at a Car Dealership

A Shop Assistant's Sales Goal

Key Takeaways

Frequently Asked Questions

Glossary

Formula Card

Commission

Total earnings

Commission rate

Sales needed

More in This Topic

Introduction to Percentages

Finding Percent of a Number

Percent Increase and Decrease

Percent Proportion