Guides / Tiered commission
Understanding tiered sales commission
Last updated July 2026. For education only; not employment or tax advice.
Flat rate vs tiered commission
A flat commission pays the same percentage on every pound of sales — 5% on all revenue, for example. Tiered (or banded) commission pays different rates on different portions of sales, much like UK Income Tax bands apply only to the slice of income in each band. A common structure might pay 4% on revenue up to £50,000 and 7% on revenue above that threshold. The higher rate applies only to the excess, not retroactively to everything below the threshold.
Marginal tiers: a worked example
Suppose tiers are 5% on the first £10,000 of monthly sales and 8% on anything above. If you sell £14,000 in a month, commission is (5% × £10,000) + (8% × £4,000) = £500 + £320 = £820. You do not earn 8% on the full £14,000 unless your contract explicitly says so — always read the wording. Our tiered commission calculator models marginal bands so you can forecast monthly or quarterly earnings from offer letters.
What contracts often add (and calculators skip)
Real schemes may include accelerators only after team targets are met, clawbacks when customers cancel within 90 days, draws against future commission, caps on total payout, or different definitions of "revenue" (gross vs net of discounts or VAT). Commission might be calculated on profit margin rather than top-line sales. Holiday pay on commission, pension treatment, and whether commission is pensionable all affect take-home pay. Reconcile any online estimate with HR and your written contract.
Comparing job offers
A higher top-tier rate on unreachable sales is worth less than a moderate rate on realistic volumes. Model your expected sales band, not your best-ever month. Pair commission forecasts with the take-home pay calculator if part of pay is salary plus variable commission — tax is usually withheld through PAYE on the combined package, but large swings can affect cash flow month to month.
Self-employed vs employed sales
Employed salespeople generally have tax handled by payroll. Self-employed agents invoice clients and manage their own tax and National Insurance. Tiered percentages may look similar on paper but legal status, expenses, and VAT registration change the net picture entirely. This guide focuses on understanding band maths, not employment status determinations.
Related tools
Forecast banded commission with the tiered commission tool. For salary context see UK take-home pay and salary to hourly if you are comparing package structures.