Commission agreement template
A commission agreement tells a salesperson exactly how their pay is calculated: the rate, what sales count, when a commission is earned, when it's paid, and what happens to deals in the pipeline when they leave. It's the document both sides reach for when a big order is refunded or a rep resigns the week before a deal closes. This template works for employees on commission and independent sales reps.
Updated November 5, 2026 · 3 min read
The contract
Gray blanks are yours to fill in before you send. Each signer fills in the blanks in their color.
- You, before sending
- Sales rep
- Company
Commission Agreement
This Commission Agreement (the "Agreement") is made on Agreement date between Company name (the "Company") and Rep name (the "Rep"). It applies to sales made from Plan start date until it is replaced under section 9.
1. Role and territory
The Rep works for the Company as Employee or contractor and sells these products or services: Products or services sold, in this territory or to these accounts: Territory. If the Rep is an employee, any base pay is set out separately and this Agreement covers commission only.
2. Commission rate
The Rep earns a commission of Commission rate of Net Sales on each commissionable sale. Above an annual quota of Annual quota in Net Sales, the rate becomes Rate above quota for the rest of the plan year.
3. What is commissionable
"Net Sales" means the amount the customer is invoiced for the products or services above, less discounts, credits, returns, sales tax, shipping and amounts the Company pays to third parties on the customer's behalf. These house accounts are not commissionable: House accounts. The Company may accept or reject any order and set its prices and terms.
4. When commission is earned and paid
A commission is earned when the Company receives the customer's payment for a commissionable sale, and only on the amount received. Earned commissions are paid Payment schedule, with a statement showing each sale, the amount received and the commission. The Rep has Statement review days days after a statement to raise any error, and the Company will review it in good faith and correct it.
5. Draw against commission
The Company will advance the Rep a draw of Draw amount per Draw period. Draws are deducted from commissions earned in later periods. The draw is Draw recovery terms. Any recovery from an employee's pay will be made only as the law allows. If no draw amount is filled in, this section does not apply.
6. Split deals
When more than one salesperson works on a sale, the Company's sales manager will set each person's share in writing before the order is booked. If no split was set, the commission goes to the salesperson who owns the account under section 1.
7. Refunds and chargebacks
If the Company refunds or credits a customer for a sale on which commission was paid, the commission on the refunded amount is deducted from the Rep's next commission payment, as the law allows. Nothing is deducted for refunds made more than Chargeback months months after the commission was paid.
8. When the Rep leaves
If the Rep's work for the Company ends for any reason, the Rep is paid commission on sales booked on or before their last day, as and when those commissions are earned under section 4, and on the normal schedule or sooner where the law requires. No commission is earned on orders booked after the last day.
9. Changes to this plan
The Company may change or replace this plan for future sales by giving the Rep at least Plan change notice days days' written notice. A change never reduces commission on sales booked before it takes effect.
10. General
This Agreement does not change whether the Rep's work is at will or for a fixed period; that is set by the Rep's other agreements with the Company. It is governed by the laws of the state of State, replaces earlier commission plans for the same period, and can be changed only as section 9 allows or in writing signed by both. Electronic signatures count as originals, and the Rep will receive a signed copy.
Rep details
Mailing address for statements: Rep mailing address
I have read this commission plan, including when commission is earned in section 4, and I will receive a signed copy.
Sales rep
For the Company
Opens it in SignMaster as a template you can edit and send.
A starting point, not legal advice. Have a lawyer review it for your state and situation.
On this page
Why commission needs to be in writing
Commission disputes are some of the most common wage claims, and they usually turn on one word: earned. Is it earned when the customer signs, when the order ships, or when the invoice is paid? A written plan answers that. Some states require it outright: California's Labor Code section 2751 says commission arrangements with employees must be in a signed written contract that explains how commissions are calculated and paid, and New York's Labor Law section 191 requires a written agreement for commission salespeople.
What the template covers
- Role and relationship: whether the rep is an employee or an independent contractor, and their territory or accounts.
- Commission rate: a percentage of net sales or margin, with optional tiers or accelerators above quota.
- What's commissionable: net of returns, discounts, taxes and shipping, and which accounts are house accounts.
- Earned and paid: commission is earned when the customer pays, then paid on a set schedule with a statement.
- Draw: an optional advance against future commission, and whether it's recoverable.
- Splits and chargebacks: how shared deals divide, and how refunds come back off later commissions.
- Changes to the plan: advance written notice before new rates apply.
- After the rep leaves: commission on orders taken before the last day, paid when those customers pay.
Mistakes that start commission disputes
- Leaving "earned" undefined. Courts tend to read gaps in favor of the salesperson.
- Changing rates mid-quarter without notice. Give notice before the new plan applies, and get a signature on it.
- Withholding earned commission when someone quits. Many states treat earned commission as wages that must be paid on time.
- Recovering a draw from an employee's final paycheck without checking the law. Some states limit deductions from wages.
- Ignoring minimum wage. A commission-only employee still has to earn at least minimum wage for the hours they work, unless an exemption applies.
Employee or contractor is a legal test
Calling a rep an independent contractor doesn't make them one. Federal and state tests look at control over how, when and where they work. If you direct their schedule and methods, treat them as an employee, with payroll taxes and wage rules, whatever the agreement says.
How to send it with SignMaster
- 1
Open the commission plan
Press Use this template. It arrives in SignMaster as a template with the sales rep signing first and the company second, so the rep's signature confirms they received it.
- 2
Fill in the numbers
Complete the gray blanks: the rate, the quota and accelerator, the draw, the payment schedule, the territory and the notice period for changes. Write tiers in plain sentences, like 8% up to quota and 10% above it.
- 3
Protect the pay details
Commission rates are private. Add an access code, one you share or a one-time code emailed to the rep, so only they can open the envelope. They add their mailing address for statements and sign.
- 4
Keep the signed copy on file
Your signer countersigns, and both get the PDF with its certificate of completion. The certificate records when the rep signed. California, for one, requires employers to hand employees a signed copy of the plan and get a signed receipt.
A new plan for the whole sales team
Each January, every rep needs the new year's plan with their own rate, quota and territory. Put the team in a spreadsheet with columns named after the gray blanks, such as Commission rate, Annual quota and Territory, and bulk send gives each rep their own envelope. Nobody sees a colleague's numbers. Turn on reminders, and set a sign-by date before the first payroll under the new plan.
Questions? Answers.
Is a commission agreement required by law?
In some states, yes. California requires a signed written contract for employees paid commission, and New York requires a written agreement for commission salespeople. Elsewhere it's not required but it's still the best protection.
When is commission earned?
Whenever the agreement says. This template makes it earned when the customer pays the company, which protects you from paying on orders that are later canceled or never paid.
Do I owe commission after an employee leaves?
Usually, for sales they made before leaving, once those commissions are earned under the plan. State wage laws often set deadlines for paying them, so check yours.
Can the rep sign the commission plan on their phone?
Yes. The link opens in any phone or computer browser, without an account. If you use an access code, they enter it first.
Sources
- California Labor Code § 2751: commission contracts in writing · leginfo.legislature.ca.gov
- New York Labor Law § 191: frequency of payments; commission salespersons · nysenate.gov