A commission agreement sets how a salesperson, agent, or partner gets paid for the sales they generate. The disputes it prevents are almost always about one question: when is commission actually earned? Write that down first, then the rest is straightforward.
Our free commission agreement template already has the structure. Here is what to put in each part.
1. Appoint the person and the territory
Name the company and the salesperson or agent, and say what they are authorized to sell (products, services, a territory, or a customer list). If the role is exclusive, say so; if they can work for others, say that too.
2. Define the rate and the basis
Commission can be a percentage of each sale, a flat amount per deal, or a tier that rises with volume. State the rate and what it is calculated on — invoice total, net of discounts, or collected cash. Ambiguity here is how arguments start.
3. Say when commission is earned
This is the most important sentence in the document. Typical choices: when the order is placed, when the invoice is issued, or when the customer actually pays. Then add chargebacks — what happens if the customer cancels, returns the goods, or never pays.
4. Payment timing and records
State how often commissions are paid (monthly is common) and how sales are tracked. The salesperson should know where to look if they want to check a figure.
5. Independent status, then sign
If the person is not an employee, say they are an independent contractor and handle their own taxes. That is a different document from an employment contract. Both parties should sign before the first sale. For someone who only introduces customers (and does not close them), a referral agreement is usually the better fit.
Disclaimer: This article is for general informational purposes only and is not legal or tax advice. Commission and worker-classification rules vary by jurisdiction.