In more detail
Commission plans come in a few shapes. A flat rate pays the same percentage on every sale. A tiered (graduated) plan pays a higher rate on each slice of sales above a threshold, exactly as tax brackets do. A cliff or retroactive plan instead applies the higher rate to all sales once a threshold is crossed. Many jobs combine a base salary with commission, and some pay a "draw": an advance against future commission that is deducted when commission is earned.
Why it matters
Two plans with the same headline rates can pay very different amounts depending on whether tiers are graduated or retroactive. Knowing which applies tells you what the next sale is really worth and whether a draw must be paid back if sales fall short.
Example
Tiers of 5% up to $10,000, 8% from $10,000 to $50,000 and 10% above, on $60,000 of sales:
| Slice | Rate | Commission |
|---|---|---|
| $0–$10,000 | 5% | $500 |
| $10,000–$50,000 | 8% | $3,200 |
| $50,000–$60,000 | 10% | $1,000 |
| Total | $4,700 |
A flat 8% would pay $4,800; a retroactive plan paying 10% on all sales once they pass $50,000 would pay $6,000.