Commission Agreement Template

Create a professional commission agreement that protects both parties, clearly defines payment terms, and establishes commission structures. Download as PDF or customize online.

Commission Agreement Template

A commission agreement is a legally binding document that outlines the terms and conditions under which a salesperson or representative will earn commission-based compensation for their sales activities. This comprehensive template helps businesses and sales professionals establish clear, enforceable commission structures while protecting both parties' interests.

What This Template Is For

This commission agreement template is designed for businesses and sales professionals who need to formalize their commission-based compensation arrangements. It provides a structured framework for defining payment terms, commission rates, and performance expectations while preventing potential disputes through clear documentation.

When To Use This Template

Use this commission agreement template when:

  • Hiring new sales representatives
  • Updating existing commission structures
  • Converting employees to commission-based pay
  • Establishing independent contractor relationships
  • Implementing new sales incentive programs

How To Customize It

Follow these steps to customize your commission agreement:

  1. Define the commission structure (base salary + commission, straight commission, or tiered)
  2. Specify commission rates and calculation methods
  3. Outline qualifying sales activities and criteria
  4. Set payment terms and schedules
  5. Add any performance targets or bonus structures
  6. Include confidentiality and non-compete clauses if needed
  7. Review and adjust termination and post-termination commission terms

Common Use Cases

This template is commonly used in:

  • Real estate brokerage agreements
  • Software sales contracts
  • Manufacturing representative agreements
  • Insurance agent contracts
  • Retail sales compensation plans

Best Practices

  • Clearly define what constitutes a completed sale
  • Specify exact commission percentages and calculation methods
  • Include detailed payment schedules and terms
  • Address potential scenarios like split commissions
  • Define the handling of post-termination commissions
  • Have legal counsel review before implementation

Template Variations

Common variations include:

  • Tiered commission structures
  • Territory-based agreements
  • Team commission plans
  • Product-specific commission rates
  • Performance-based scaling commissions

Success Stories

Companies using well-structured commission agreements report:

  • 40% increase in sales team retention
  • Reduced commission disputes
  • Improved sales performance tracking
  • Better alignment of sales and business goals

Frequently Asked Questions

What should a commission agreement include?

A comprehensive commission agreement should include commission rates, payment terms, qualifying sales criteria, calculation methods, and termination provisions.

Are verbal commission agreements legally binding?

While verbal agreements can be binding, written commission agreements provide better legal protection and clarity for all parties.

How often should commission agreements be updated?

Review and update commission agreements annually or when significant changes occur in business operations or sales strategies.

Can commission structures be changed after signing?

Changes require mutual agreement and should be documented in writing through an amendment to the original agreement.

What happens to commissions after termination?

The agreement should specifically address how pending and future commissions are handled after employment ends.