Sales Commission & Incentive Programs
How to Make a Sales Commission Agreement
It is crucial to have a properly worded sales commission agreement when working with sales commissions. The compensation received under a commission structure can be subject to many conditions and variables, so it's important to have the details understood by the salesperson to avoid future disputes. The commission structure can vary greatly among employers. For example, a real estate commission may be a straight commission that is a percentage of the sales price. A sales rep for a retail company may have an entirely different agreement, which may include a base salary and bonus payouts that rise as sales rise. The right to commissions can be conditioned on many factors, such as:
- Developing a sales plan.
- Meeting an individual sales quota or having the entire sales department meet a certain quota.
- Having the goods or services be delivered to and accepted by the customer.
- Continuing employment by the company and with a certain department.
- Satisfactory job performance and compliance with employer policies and procedures.
Commission only sales positions can be very competitive and the average sales commission can vary greatly by position. Most sales jobs offer compensation that includes a salary along with a commission structure and other incentives. Disputes involving a sales rep commission typically arise when the details of an incentive program weren't fully understood by the salesperson. That's why it's vital to have a quality sales commission contract sample that includes the key terms. The following are examples of the questions that you may need addressed:
- 1. What happens to a commission for a completed sale if the salesperson quits or is terminated?
- 2. What happens to a real estate commission if a home owner gets a new real estate agent or decides to sell the property on their own?
- 3. Will there be any splitting of a commission when the salesperson completes a sale but another sales rep generated the lead?
- 4. What happens when a customer places an order but fails to pay in full or returns the product?
The above questions will vary by the nature of the sales job, but it's important to think about all the possible scenarios and address them in the commission agreement. The right incentive program can be profitable for both the company and salesperson. However, it is vital that the terms of any commission agreement be written into the proper sales commission contract sample form in order to avoid misunderstandings and future litigation.