Sales Commission Agreement Template: Sample, Benefits and How to Create

Sales commission agreements are used by businesses to outline the terms and conditions of a commission-based compensation arrangement between an employer and an employee. This type of agreement can be beneficial for both parties involved, as it can help clarify the expectations and responsibilities of each party. In this blog post, we will provide a sales commission agreement template that you can use as a reference when creating your own agreement. We will also discuss the benefits of using a commission template and provide tips on how to create an effective agreement.

What is a commission template and what does it include

A commission agreement template is a document used by employers and employees to outline the terms of a commission-based job. This type of contract outlines the percentage of sales that will be paid out as a commission, as well as any other bonuses or incentives that may be offered.

A commission agreement template should include: 

• The names and contact information of the employer and employee
• A description of the services to be provided
• The commission percentage or rate
• Any bonus or incentive programs that are offered
• The term of the agreement
• How commissions will be paid (e.g. weekly, monthly)
• Signature lines for both parties

The most important thing that the template should always include is a section on how commissions will be calculated, such as whether they will be based on gross or net sales. Other important details to include are when commissions will be paid (such as monthly or quarterly) and what happens if an employee leaves the company before their agreed upon term is up.

By having all of these details ironed out in advance, you can avoid any misunderstandings or disputes down the road.

The benefits of the commission agreement template

A commission agreement template can be very beneficial for both employers and employees. For employers, it provides a way to clearly define the expectations and terms of the commission arrangement in writing. This can help avoid any misunderstandings or disputes that may arise later on. Additionally, it can protect the company from liability if an employee were to ever make a claim against the company for unpaid commissions.

For employees, a commission agreement template can provide clarity on what is expected of them and how their compensation will be calculated. This can help prevent any confusion or frustration down the road. Additionally, it can give employees peace of mind knowing that their commissions are protected in the event that they leave the company before their agreed upon term is up.

Overall, a commission agreement template is a valuable tool for both employers and employees. It can help to avoid any misunderstandings or disputes and protect both parties in the event that something goes wrong. If you’re thinking of implementing a commission structure at your company, be sure to use a commission agreement template to ensure that everything is fair and above board.

Creating a sales commission agreement may seem like a daunting task, but it doesn’t have to be. By using a commission agreement template, you can create a legally binding document that outlines the terms of the agreement between you and your employee.

So, the benefits of the commission agreement template are:

• Lays out the expectations for both employer and employee
• Protects the rights of both parties
• Can be used as a legal document if there are any disputes

How to create a commission template for your sales team

Now that you know the benefits of using a commission agreement template, let’s go over how to create one. Here are the steps you’ll need to take:

• Choose the type of sales commission plan you want to use.
• Decide on the percentage or dollar amount of sales that will trigger a commission.
• Set a time frame for when commissions will be paid out (weekly, monthly, etc.)
• Clearly state what happens if an employee leaves the company before their agreed upon term is up.
• Include signature lines for both parties.

By following these steps, you can create a commission agreement template that meets your specific needs and protects your interests. And by doing so, you’ll set your team up for success.

Tips for using a commission template to increase sales productivity

Once you have your commission agreement template in place, there are a few things you can do to make sure it’s working effectively.

Here are a few tips:

• Make sure all sales team members are aware of the commission structure and what is expected of them.
• Communicate regularly with sales team members about their performance and how they are tracking against their goals.
• Be flexible with the commission structure as needed to ensure that it is motivating employees and driving results.
• Celebrate successes with the whole team to keep morale high and motivation levels up.

By following these tips, you can get the most out of your commission agreement template and see an increase in sales productivity.

Sales commission agreement template sample

Below is a sample of a sales commission agreement template:

This Sales Commission Agreement ("Agreement") is made and entered into as of [DATE], by and between [COMPANY NAME], a corporation organized and existing under the laws of the State of [STATE/PROVINCE], with a place of business located at [ADDRESS] (the "Company"), and [SALESPERSON NAME], an individual with a mailing address of [SALESPERSON ADDRESS] (the "Salesperson").

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

Commission Structure. The Salesperson will be compensated on a commission basis at the rate of [PERCENTAGE OF SALES] of all gross sales (the "Commission Rate") generated by the Salesperson in accordance with the terms and conditions set forth herein. All commissions will be paid within [NUMBER OF DAYS] days following the close of each calendar month during which such commissions were earned, provided that the Company has received payment from its customers in respect of such sales. In the event that the Company does not receive payment from its customer for any reason, then no commission will be due or payable to the Salesperson with respect to such sale.

Minimum Quarterly Sales Quota. The Salesperson's commission shall be subject to a minimum quarterly sales quota (the "Quota"), which shall be equal to [DOLLAR AMOUNT]. If at any time during a quarter the Salesperson's commissions earned are less than the Quota, then no commission shall be due or payable for that quarter. However, any shortfall in one (l) quarter shall not preclude the payment of commissions in future quarters, provided that the Salesperson meets the minimum quarterly sales quota in such future quarters.

Override Commission Rate. The Salesperson shall earn an override commission rate of [PERCENTAGE] on all new business accounts brought in by the Salesperson during the term hereof (each a "New Account"). For purposes of clarity, a New Account is defined as any customer that was not previously doing business with the Company within eighteen (18) months prior to the date that such customer contracts with the Company.

Override Commission Minimum. Notwithstanding anything to the contrary herein, in no event shall the Salesperson's override commission rate be less than [DOLLARS] per year.

- Commission Structure. The Salesperson's commission shall be structured as follows:

[PERCENTAGE] of all gross revenues generated from new accounts brought in by the Salesperson during the term hereof; and

[PERCENTAGE] of all gross revenues generated from existing accounts serviced by the Salesperson during the term hereof.

For purposes of clarity, "existing accounts" are defined as any customer that was doing business with the Company within eighteen (18) months prior to the date that such customer contracts with the Company for services to be performed by the Salesperson.

- Sales Quotas. The Salesperson shall be required to achieve certain minimum sales quotas as set forth by the Company from time to time during the term hereof. The Salesperson's failure to meet such minimum sales quotas shall result in a pro-rata reduction of the commissions otherwise payable to the Salesperson pursuant to this Agreement.

- New Accounts. For purposes of this Agreement, "new accounts" are defined as any customer that was not doing business with the Company within eighteen (18) months prior to the date that such customer contracts with the Company for services to be performed by the Salesperson; provided, however, that any person or entity that becomes a new account as a result of actively pursuing and completing a merger or acquisition with another company shall not be considered a new account.

- Existing Accounts. For purposes of this Agreement, "existing accounts" are defined as any customer that was doing business with the Company within eighteen (18) months prior to the date that such customer contracts with the Company for services to be performed by the Salesperson; provided, however, that any person or entity that becomes an existing account as a result of actively pursuing and completing a merger or acquisition with another company shall not be considered an existing account.

- Renewals. For purposes of this Agreement, "renewals" are defined as any contract for services between the Company and a customer where (i) such contract is entered into within twelve (12) months of the expiration or termination of a prior contract between the Company and such customer, (ii) the services to be performed under such renewed contract are materially similar to the services provided pursuant to the prior contract, and (iii) there is no material change in the customer's business or circumstances. Notwithstanding anything herein to the contrary, a "renewal" shall not include any new services that are outside of the scope of work set forth in Exhibit A hereto.

- Base Commission Rate. The Salesperson shall be eligible to earn a commission equal to [__]% of all revenues invoiced by the Company during each twelve (12)-month period ("Base Commission Rate"), subject to increase or decrease based on achievement of agreed upon targets as set forth in Exhibit B. The Base Commission Rate shall be increased or decreased, as applicable, on the first day of each fiscal year of the Company, provided that any increase shall not exceed [__]% per year.

- Sales Quotas. The Salesperson's commission payments shall be subject to meeting agreed upon sales targets set forth in Exhibit B (the "Sales Quotas"). If the Salesperson fails to meet the Sales Quotas in any given twelve (12)-month period, the Salesperson shall only be eligible to earn a commission equal to [__]% of all revenues invoiced by the Company during such twelve (12)-month period. Notwithstanding anything herein to contrary, if the Salesperson meets or exceeds one hundred fifty percent (150%) of the Sales Quotas in any given twelve (12)-month period, the Salesperson shall be eligible to earn a commission equal to two and one-half percent (250%) of all revenues invoiced by the Company during such twelve (12)-month period.

- Base Salary. During the Term, the Salesperson shall receive a base salary of [__] per year, payable in accordance with the Company's normal payroll practices. The Salesperson acknowledges and agrees that his or her continued employment is at will and may be terminated by either party at any time for any reason with or without cause or notice.

- Expenses. The Salesperson shall be reimbursed for all reasonable out-of-pocket expenses incurred by him or her in performing his or her duties hereunder, including travel and entertainment expenses, in accordance with the Company's then-current policy regarding such expenses.

- Benefits. The Salesperson shall be eligible to participate in all employee benefit plans that are generally available to the Company's employees, subject to the terms and conditions of such plans.

- Confidentiality. The Salesperson acknowledges that he or she will have access to confidential information of the Company, including but not limited to customer lists, pricing information and marketing strategies (the "Confidential Information"). The Salesperson agrees that he or she will not disclose any Confidential Information to any third party without the prior written consent of the Company. The Salesperson will use the Confidential Information only for the purposes of performing his or her duties under this Agreement.

- Non-competition. During the term of this Agreement and for a period of [NUMBER OF YEARS] years thereafter, the Salesperson agrees not to engage in any business that competes with the Company's business in any geographic area where the Company does business.

- Non-solicitation. During the term of this Agreement and for a period of [NUMBER OF YEARS] years thereafter, the Salesperson agrees not to solicit or encourage any employee of the Company to leave his or her employment with the Company.

The Salesperson acknowledges that he or she has read and understands this Agreement and that it is binding upon his or her heirs and assigns.

This Agreement shall be governed by the laws of the State of [STATE].

The Salesperson agrees that any legal action arising out of this Agreement or his or her relationship with the Company shall be filed exclusively in the state or federal courts located in the State of [STATE].

The Salesperson hereby waives any right to a jury trial in connection with any action arising out of this Agreement or his or her relationship with the Company.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first written above.

COMPANY: _________________________

By: ____________________________

Its: ___________________________

SALESPERSON: _______________________

By: ____________________________

Its: ___________________________

This Sales Commission Agreement template is provided as a sample for you to use in creating your own commission agreement. This sales commission agreement sets forth the terms and conditions under which [COMPANY NAME] ("Company") will engage [SALESPERSON] ("Salesperson") to sell [PRODUCTS AND/OR SERVICES]. The term of this Agreement shall begin on [DATE] and continue until [DATE], unless otherwise terminated in accordance with the provisions below.

The Salesperson shall be entitled to earn a sales commission, as set forth in Exhibit A, for all products and/or services sold by the Salesperson during the term of this Agreement. The Salesperson's sales commission shall be paid in accordance with the Company's regular payroll schedule.

The Salesperson acknowledges and agrees that he or she is an independent contractor and not an employee of the Company. The Salesperson shall not be entitled to any of the benefits provided by the Company to its employees, including but not limited to health insurance, vacation pay, sick pay, or retirement benefits.

This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings between them. This Agreement may not be amended or modified except by a written agreement signed by both parties.

Each party has signed this Agreement through its authorized representative as of the date first set forth above. 

COMPANY

Signature: _____________________________________________________

Typed or Printed Name: ___________________________ Title: _______________

Date: ____________________

SALESPERSON

Signature: _____________________________________________________

Typed or Printed Name: ___________________________ Title: _______________

Date: ____________________

The Salesperson's obligations under this Agreement are personal to the Salesperson and may not be assigned or transferred by the Salesperson without the prior written consent of the Company. Any attempted assignment or transfer in violation of this provision shall be void and without effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their successors and permitted assigns. Nothing contained herein is intended or shall be construed as conferring upon any other person or entity any rights, benefits or remedies of any kind whatsoever.

This Agreement and the exhibits hereto contain the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings between the parties with respect to such subject matter. This Agreement may not be amended except in writing signed by both parties. 

This Agreement shall be governed by and construed in accordance with the laws of ____________________ , without regard to principles of conflicts of law. The United Nations Convention on Contracts for the International Sale of Goods is expressly disclaimed. Exclusive jurisdiction over all disputes arising under this Agreement shall reside in ___________________ courts, and each party hereby irrevocably submits to the personal jurisdiction of such courts. 

The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision. In the event that any such provision is determined to be invalid or otherwise unenforceable, then this Agreement shall be construed in accordance with its terms as if such invalid or unenforceable provisions were not contained herein.

This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together constitute one and the same agreement. A signature delivered by facsimile, email transmission or other electronic means shall be binding to the same extent as an original signature delivered in person. 

This Agreement and each party's obligations hereunder shall be binding on the representatives, assigns and successors of such party. Each party has signed this Agreement through its authorized representative.

IN WITNESS WHEREOF, the parties have caused this Sales Commission Agreement to be executed as of the date first above written.

COMPANY NAME: _____________________________

By: _______________________________________

Its: _________________________________________

Authorized RepresentativeSignature Reads: ___________________________________ Name: ___________________________ Title: ___________________________ Date: ___________________________

Sales Agent/Contractor Signature Reads: ___________________________________ Name (Printed): ____________________ Title (if applicable):____________________ Date:___________________________

WITNESSES:

_____________________________________________ _____________________________________________

Signature Reads: ___________________________ Signature Reads: ___________________________

Name (Printed): ___________________________ Name (Printed): ___________________________

Title (if applicable):____________________ Title (if applicable):____________________

Date:___________________________           Date:___________________________

FAQs about commission agreements

Sales commission agreement templates can provide a lot of clarity and structure to sales compensation, but they’re not without their questions. Here are some answers to common questions about using commission templates.