Calculate progressive commissions and generate the Excel formula.
Tier 1 (Base Level)
Tier 2 (Mid Level)
Applies to sales between Tier 1 Limit and this amount.
Tier 3 (Top Level)
Calculation Results
Tier 1 Commission:$0.00
Tier 2 Commission:$0.00
Tier 3 Commission:$0.00
Total Commission:$0.00
Effective Rate:0.00%
Excel Formula (SUMPRODUCT Method)=SUMPRODUCT(…)
Copy the formula above into Excel. Replace A1 with your sales cell.
function calculateCommission() {
// 1. Get Inputs
var sales = parseFloat(document.getElementById('totalSales').value);
var t1Limit = parseFloat(document.getElementById('tier1Limit').value);
var t1Rate = parseFloat(document.getElementById('tier1Rate').value) / 100;
var t2Limit = parseFloat(document.getElementById('tier2Limit').value);
var t2Rate = parseFloat(document.getElementById('tier2Rate').value) / 100;
var t3Rate = parseFloat(document.getElementById('tier3Rate').value) / 100;
// Validation
if (isNaN(sales) || sales = t2Limit) {
alert("Tier 2 Limit must be greater than Tier 1 Limit.");
return;
}
// 2. Calculate Tiers
var comm1 = 0;
var comm2 = 0;
var comm3 = 0;
// Tier 1 Calc
if (sales > t1Limit) {
comm1 = t1Limit * t1Rate;
} else {
comm1 = sales * t1Rate;
}
// Tier 2 Calc
if (sales > t1Limit) {
var tier2Sales = Math.min(sales, t2Limit) – t1Limit;
// Ensure we don't calculate negative if something is odd, though logic prevents it
if (tier2Sales > 0) {
comm2 = tier2Sales * t2Rate;
}
}
// Tier 3 Calc
if (sales > t2Limit) {
var tier3Sales = sales – t2Limit;
comm3 = tier3Sales * t3Rate;
}
var totalComm = comm1 + comm2 + comm3;
var effectiveRate = (sales > 0) ? (totalComm / sales) * 100 : 0;
// 3. Display Results
document.getElementById('resTier1').innerText = "$" + comm1.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resTier2').innerText = "$" + comm2.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resTier3').innerText = "$" + comm3.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resTotal').innerText = "$" + totalComm.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resEffective').innerText = effectiveRate.toFixed(2) + "%";
document.getElementById('resultsArea').style.display = 'block';
// 4. Generate Excel Formula
// Method: Differential Rates SumProduct
// Formula Logic: =SUMPRODUCT((A1>{0, L1, L2}) * (A1-{0, L1, L2}) * {R1, R2-R1, R3-R2})
var diff2 = t2Rate – t1Rate;
var diff3 = t3Rate – t2Rate;
// Format for Excel (clean numbers)
var formula = "=SUMPRODUCT((A1>{0," + t1Limit + "," + t2Limit + "}) * (A1-{0," + t1Limit + "," + t2Limit + "}) * {" + t1Rate + "," + diff2.toFixed(4) + "," + diff3.toFixed(4) + "})";
document.getElementById('excelFormula').innerText = formula;
}
Understanding Tiered Commission Rate Structures in Excel
Calculating sales commissions can be straightforward if you use a flat rate. However, most modern sales compensation plans utilize a tiered rate structure (also known as a marginal or progressive tax-style structure). This incentivizes sales representatives to exceed targets by offering higher payout percentages on revenue generated above specific thresholds.
What is a Tiered Rate Structure?
In a tiered structure, the commission rate changes depending on the total sales volume, but—crucially—the new rate only applies to the specific chunk of revenue that falls within that bracket. It does not retroactively apply to sales made in lower brackets.
For example, if the structure is:
0 to $10,000: 5%
Over $10,000: 10%
If a rep sells $15,000, they earn 5% on the first $10k ($500) and 10% on the remaining $5k ($500), for a total of $1,000. They do not earn 10% on the entire $15,000.
Excel Formula for Commissions with Tiered Rates
There are two primary ways to calculate this in Excel. The calculator above uses the SUMPRODUCT method, which is cleaner and easier to maintain than nested IF statements.
Method 1: The SUMPRODUCT "Differential" Method (Recommended)
This method calculates the commission by summing the "differential" rates. It essentially asks: "How much is the sales amount above threshold X?" and multiplies that excess by the "increase" in commission rate for that tier.
This is the formula generated by our tool automatically.
Method 2: Nested IF Statements
While easier to understand logically for beginners, this becomes very long and prone to errors if you have more than 2 tiers.
Logic: If Sales > Tier 2 Limit, calculate full Tier 1 + full Tier 2 + remainder at Tier 3. Else If Sales > Tier 1 Limit, calculate full Tier 1 + remainder at Tier 2. Else, calculate all at Tier 1.
How to Use This Calculator
Enter Total Sales: Input the gross revenue generated by the sales rep.
Define Tier 1: Set the upper limit for the base tier (e.g., $10,000) and the rate.
Define Tier 2: Set the upper limit for the middle tier (e.g., $50,000) and the rate.
Define Tier 3: Set the rate for any sales exceeding the Tier 2 limit.
Calculate: Click the button to see the breakdown and get the ready-to-paste Excel formula.