Many an employer has engaged in litigation with current or former salespeople who claimed that they were not paid commissions earned. Some states, such as California, require companies to put commission agreements in writing, which is a good idea, whether or not it’s mandatory. Here are provisions that should be found in most all commission agreements.
- The date of earning commissions. Is it the time the sale was made, the money was collected, etc.?
- The date of paying commissions. This is usually the next available pay period.
- The management of draws against commissions. How long does the draw last? What if commissions never exceed the draw?
- Dealing with commissions when employment is terminated.
- The treatment of commission reductions when a customer fails to pay or returns an item.
- The commission split if the sale involves more than one person.
- The level of profitability required for a sale to earn a commission.
- The period of commission payments if the sale involve ongoing payments (i.e. a service contract) For example, a salesperson might receive commissions for six months, after which the item becomes a house account).
HR That Works has an extensive Employment Agreement which includes commission provisions.
