Have you ever wondered that more than 50% of workers in your organization would
be willing to leave your company for a 10% salary increase or may be even less
that? To attract and retain any employee, compensation is majorly the most
important factor, especially in sales. There could even arise a situation when
all your employees may leave your organization simply because of poorly designed
The results won’t amuse you. If your organization is
struggling to find or strike a balance between company requirements and the
compensation needs of employees, it would act as a warning sign to revaluate
your compensation plan and commission structure. It is generally not only the
salary as a way of remuneration, rather there are other ways out of which
Commission is one. Now to enter into a commission agreement, it is important to
enter into a commission agreement. The agreement shall contain the terms and
condition for the terms of employment and remuneration.
Commission agreement is a legal document that protects both the parties.
Commission means any kind of payment made for the services taken by any person
for any kind of work done. A commission agreement is made between an employer
and the employee that basically outlines a variety of factors, which eventually
determines the nature of their relationship. It includes:
- Nature of their relationship
- The terms and working of their relationship
- The commission percentage they will earn along with their salary
A commission agreement is a vital tool when hiring new employees into the
organization. It is also essential when you are entering into a job as a
salesperson where a commission will be the payment method. Your sales would
ultimately determine the amount of remuneration at the end of the month. It is
not only beneficial for the employer but also for the employee to set up formal
terms for their agreement to avoid any sort of misunderstanding. It is also a
perfect time for the employer for including a non-compete clause if they decide
to have one.
Uses of Commission Agreement
In this agreement, one of the parties i.e. the company engages an entity called
the ‘introducer’ who has the task of finding a suitable investor for the company
to meet the funding requirements of the company. The Introducer in return
receives a certain percentage of the amount of the funds raised by the company
through investor. Not only this, a marketing, sales or a distribution agreement
could also have a percentage-based commission. The marketing agreement or the
sales agreement are of repetitive nature, that is the commission is paid on each
- You're hiring a new employee who will be paid in whole or in part on
commission and wish to set down everyone's rights and obligations
- You're being hired and you want to make sure everyone's rights and
obligations are documented if your employer hasn't provided a written
Components of Commission Agreement:
- Contact Information
- Commission Structure
- Non-Compete Clause
- Non-Disclosure Clause
The Company appoints the agent and give him exclusive or non-exclusive
rights. This clause covers the basic information about the nature of job or
the purpose for which the commission agreement is entered into
- Independent contractor:
Whether the relationship is of independent
contractor or not.
This clause shall lay down the duties of the agent or the
employees as the case may be.
under this clause the agent will carry liability insurance.
Obligation that needs to be carried out by both the parties
- Compensation and benefits:
It shall include the terms and conditions
applicable under this agreement as agreed between the parties.
As part of the commission agreement, it shall lay down the
expenses that will be reimbursed to the agent/employee.
Unless the terms are renewed the agreement shall expire within
- Post -Termination:
The employee must not disclose any confidential
information about the company and the employer without any prejudice shall not
curb down the rights of the employee.
Exclusions if any that shall not be included in the agreement
- Entire Agreement:
This Agreement sets forth the entire agreement and
understanding between the parties relating to the subject matter herein and
supersedes all prior discussions between the parties. No modification of or
amendment to this Agreement, nor any waiver of any rights under this Agreement,
will be effective unless in writing signed by the party to be charged. Any
subsequent change or changes in the Agent's duties or commission will not affect
the validity or scope of this Agreement.
If one or more of the provisions in this Agreement are
deemed void by law, then the remaining provisions will continue in full force
- Attorney Fees:
In case the agreement becomes subject to litigation, then
who shall bear the attorney fees
- Additional Acknowledgements:
Both parties acknowledge and agree that: (a)
the parties are executing this Agreement voluntarily and without any duress or
undue influence; (b) the parties have carefully read this Agreement and have
asked any questions needed to understand the terms, consequences, and binding
effect of this Agreement and fully understand them; and (c) the parties have
sought the advice of an attorney of their respective choice if so desired prior
to signing this Agreement.
- Joint- Liability:
Both the parties shall be jointly liable for the
covenants entered into the agreement.
Within the period of this agreement and later as agreed
between the parties, the employee shall not disclose to third party any
confidential information, documents or knowledge pertaining to the operation or
business of the Company.
If either party fails to enforce any provision contained within this
agreement, it shall not be construed as a waiver or limitation of that party’s
to subsequently enforce and compel strict compliance with the very provision of
- Governing Law:
Mention the Country and appropriate Jurisdiction that shall
govern the Jurisdiction of this agreement.
Commission agreement is an agreement between the employer and employee and
various other parties where commission is paid on certain activities for which
the agreement has been entered into. This agreement will benefit both parties
because it outlines in formal terms the details of the work relationship.
Employees benefit from having written terms in case there is a misunderstanding
with the employer. This agreement will protect the representative's rights.
Employers can use these agreements to protect their business. This agreement
will explain what kinds of commission payments will be made to the person
selling products, or the employee.
Additional details may include product
prices, when the payments will be made, what the payments are based on, payment
method, commission percentages, and if there is a limit on the amount of
commission that a seller can make. A commission agreement can be used when you're
hiring a new employee who will be paid in whole or in part on commission and
wish to set down everyone's rights and obligations.
You're being hired and you
want to make sure everyone's rights and obligations are documented if your
employer hasn't provided a written Commission Agreement. Contact Information.
There are various components od commission agreement such as
Authorization, Commission Structure,Documentation, Non-Compete Clause,Non-Disclosure
Clause, Acceptance. Therefore, commission agreement can be cautiously used for
the following purposes.
- Miguel Ángel Gallardo Ortiz , Official Commercial Agent, Commission
Agreement, available at http://cita.es/commission/ (Last visited 7 July 2020
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visited 8 July 2020)
- Legal zoom, The basics of sales commission agreement, available at
(Last visited 10 July 2020)
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visited 11 July 2020)
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Last visited 12 July 2020)