Salespersons or sales representatives often get the payments of their efforts through a commission that has been agreed upon by them and their employers. Good examples of these professionals include a real estate broker who gets a commission by selling a property and an insurance agent or employee who obtains a commission through their client referrals. This kind of setup is arranged and detailed in a commission agreement which is mostly prepared by employers. Get an idea of how such an agreement looks like by taking a peek at our 11+ Commission Agreement Examples in PDF, Google Docs, Microsoft Word, and Apple Pages file formats.
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14+ Commission Agreement Examples
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What Is a Commission Agreement?
A commission agreement is a legal document between a seller or distributor and a product provider or an employer. Its content details how the seller will be compensated after successfully selling the employer’s products. Legalzoom states that the sales workers of a company act as public personas and that their endeavors reflect the business, as well as its brands. So, paying them accordingly and having a statutory document to back them up would surely influence how they work to get a company’s products sold in a market, and in an advantageous way.
Fair Compensation Tips for Employers
Sales representatives promote and sell your products to the appropriate people, places, and at the right prices. As the years pass by, tenured salespeople will develop their preferences when it comes to getting involved with the right employer. And, sales strategist Marc Wayshack thoughtfully gave out a few tips for employers on how to keep their compensation structure beneficial for them and their sales workforce. He indicated in his book entitled The High-Velocity Sales Organization that the morale of the said employee segment can be kept high in three ways – removing salary caps, forgo compensation plan restructuring, and making things simple.
The first tip clearly recommends avoiding putting a limitation on the workforce’s pay. As we all know, limitations prevent growth. The second tip does not necessarily mean to not restructure any compensation plan. It simply implies that restructuring compensation plans may cause a decrease in the employees’ confidence and optimism aligned to their adjustment period. The last tip is quite common. Simple sales compensation prevents confusion for both employers and salespersons, making both parties safe from any dispute.
How To Prepare a Commission Agreement
Given that a commission agreement is a legal document, you need to make sure that it follows a standard flow. Though most of its contents can be based on a company’s compensation plan, there are certain areas that cannot be found in it. To walk you through in making your commission agreement as thoroughgoing as possible, we have prepared our list of guidelines below for you to follow.
Step 1: Describe Agreement Type
There are many commission-based professions. And, each of them holds different specifications when it comes to composing a commission agreement. That is the very reason why describing the agreement’s type must be done first and foremost. Commission agreements are highly applicable in many financial aspects, such as agent commission, investments, conditional sales, corporate duties, financial support, independent contractors, and non-disclosure commission.
Step 2: Agent Authorization
You let other people sell your goods. And, we know how risky that is for the agents and your company if done under no settlement. Thus, it is highly necessary for you to provide your sales agents with authorizations to trade your products on behalf of your company.
Step 3: Select and Define Commission Structure
Basic salary plus commission, only commission, capped commission, tiered commission, territory volume, and placement fee commission composed the commission structures. Selecting one and defining it on the agreement makes your document more informative. Plus, it explains to your sales representatives how they will be given their commission and why it is advantageous on their part.
Step 4: Approval of Documentation
Salespersons are creative individuals who will take an innovative way or two to sell your goods. Without a doubt, promotional materials like brochures, flyers, forms, and even business cards, will be used as often as you thought they would be. Since such materials are needed for the success of their sales activities, their approval must be included in your agreement.
Step 5: Cite Agreement Clauses
Agreement clauses are parts of an agreement document that details the duties, rights, and exemptions of parties. For a commission agreement, there are two must-have clauses, including the non-compete and non-disclosure. The former necessitates the salespeople to pledge not to contend with other brands. The latter clause, on the other hand, necessitates the salespersons to keep pieces of internal business information highly confidential between them and their corporate affiliates.
Step 6: Seal the Deal
An agreement will not be considered complete if one of the parties does not engrave his or her signature. Not to mention, sealing the deal will not be concluded if there is no space for it in the first place. So, spaces for both employee and employer’s signature must be incorporated in addition to spaces for the dates when the agreement is signed.
FAQs
What are the components of a commission agreement?
– Company information
– Sales agent information
– Commission structure details
– Terms and conditions
– Commission rate
– Signatures
What is the average commission rate of real estate brokers in the U.S.?
According to Ownerly, the average commission rate of real estate brokers in the U.S. ranges from five percent to six percent for every home property sale. However, the organization mentioned that a Real Trends survey’s result showed that the actual commission rate of real estate brokers depends on the market.
What is the commonly used commission structure?
Base salary plus commission is the structure that is commonly used by businesses. It provides sales representatives back-up financial support in case commissions do not go the way as they planned.
The commission agreement has proven its importance for both sales employees and employers. Though many advantages have been laid out, all of them go down to one purpose, which is the protection of employment relationships between the two parties. This is in consideration of the commission aspect of their compensation.
