Sales Commission Agreement Template

If you're looking to hire sales representatives on commission or set performance bonuses for existing employees, this sales commission agreement template is for you. This template contains terms that cover authorization of the agreement up through commissions earned and payment.

• Details tiered commission percentages and monthly bonuses 
• Includes nonspecific non-compete and non-disclosure clauses for sales positions
• Defines sales quota minimums and consequences for not meeting quotas
• Explains the commission clawback process for returned products or refunded sales
• Specify required recordkeeping methods and approved CRM programs for tracking sales

Personalize every section. This sales commission agreement template is 100% free and editable online.

Who It's For 

Use this template if you have any employees who receive compensation partially or fully on commission.

• If you're a **business owner **hiring your first employee, this template can help you put a compensation structure in place before a handshake deal becomes a disagreement.
• Sales managers who have teams earning different commission percentages can use this template to standardize commission definitions across the company.
• Human resources professionals can use this template if their company already has a commission structure, but they need an official template to be signed.
• Freelancers who are selling a product on behalf of another company will also find this template useful. If you want a formal document that explains how and when you get paid commission, this template is for you.

There's included language to cover salary plus commission as well as commission-only pay scenarios.

What's Included in the Sales Commission Agreement Template

• Grant of sale authority: What you can sell, where, and to which customers. 
• Restricted territories and brands: Places and brands you cannot sell to or for.
• Non-compete and defined term: You won’t compete with the company during work and for a set time after.
• Non-disclosure: Keep company information secret and protected.
• Sales quota floors: Minimum sales targets you must meet.
• Graduated commission rates: Higher sales earn higher commission percentages.
• Monthly and quarterly bonuses: Extra pay for hitting short-term goals.
• Overtime pay rates: How extra hours are paid, if allowed.
• Buy-back provisions: What happens to commission if a sale is canceled or a product is returned.
• **Recordkeeping and CRM commission tracking **
• **Vacation policy: **Standard clause 
• Deal-killing provisions: Actions that can void a deal or your commission.
• Signature lines 

The language in this agreement is simple and easy to understand. There are also blank spaces throughout the agreement for you to fill in rates and earning limits.

How to Write Your Sales Commission Agreement

The template lays out the skeleton. Here are some decisions you should make to flesh it out.

1. Determine your commission structure 

Do you pay a flat percentage on all sales, or do your commissions tier up at higher levels? The template provides a sample tiered table, but you can easily delete tiers if you don’t need them. What if your profit margins change significantly between products? You may want to consider paying commissions on profit instead of revenue. The template assumes commissions are calculated on profit; this is preferable for protecting your margins, but requires your books to be more transparent to your reps.

2. Align quota thresholds with your sales cycle 

A rep should always be able to achieve their minimum quota by making a reasonable effort. If it takes on average six weeks to close a deal, then monthly quotas could encourage behavior such as discounting to meet quotas. Either adjust how the period is measured or modify the threshold to account for longer sales cycles.

3. Specify the details of commission clawbacks 

The template states that reps must reimburse commission if a customer returns a product. Do you only claw back commissions on full refunds, or do partial store credits trigger the clause as well? How long after the sale must a customer return a product to trigger a clawback? 30 days? Six months? Be explicit. 

4. Customize the geography of your non-compete 

The broader the restriction, the more likely it is to be struck down by a judge. If your rep is focused on a defined territory, your non-compete should match that geography rather than apply to your entire industry. Similarly, you should make the post-employment period reasonable in accordance with what your state will enforce. Depending on where you live, that’s probably one to two years. If you want three years, your clause will likely be voided.

5. Agree on how terminating affects commission eligibility 

Does a rep who quits halfway through the month get credit for deals they’ve already initiated, or nothing beyond what they closed before their last day? The template assumes the latter condition: that if a rep loses eligibility on their termination date, any deals not closed by then don’t count. If you’d like to give partial credit for pipeline deals, you can revise that section.