Sales commission agreement builder

What a sales commission agreement covers

A sales commission agreement sets out how a salesperson is paid for the revenue they generate: the rate, what counts as a sale, when commission is earned and paid, and what happens when the relationship ends. Writing these down before money is at stake prevents most commission disputes.

Sales commission agreement examples

Start with a complete template below if you need a sample sales commission agreement. These three clause examples cover common manufacturing scenarios. Treat the wording as a starting point to adapt with counsel, not as a finished contract.

Example 1: independent contractor sales commission agreement

This non-exclusive example is for an independent manufacturers’ rep exploring a market or carrying complementary lines. Define the products, territory and payment terms in the full agreement.

“Representative shall be entitled to a commission of 7% of the Net Sales Price for all orders secured from customers within the assigned territory that are a direct result of the Representative’s efforts.”

Tip: define “Net Sales Price” to exclude taxes, shipping and returns. Then set the trigger, for example: commission is earned when the Company receives full payment and is paid by the 30th day of the following month. Paying on shipment instead is more attractive to reps but shifts collection risk to you.

Example 2: exclusive territory

For a dedicated rep with strong local connections in a key region. It needs more detail on territory rights and performance.

“The Company grants the Representative the exclusive right to sell the Products listed in Exhibit A within the states of Ohio, Michigan, and Indiana (the ‘Territory’).”

House accounts: list every account you’ll keep serving directly in an exhibit, and state that no commission is due on them without written approval of the rep’s involvement. Performance: if exclusivity depends on a quota, set it from territory potential, historical conversion, capacity, ramp time and the sales cycle, and document how it’s reviewed.

Example 3: product-line specific

For a rep focused on a new, technical or high-margin line.

“This Agreement pertains exclusively to the promotion and sale of the Alpha-Series Industrial Pumps detailed in Exhibit A. For all sales of the Products, the Representative will earn 12% of the Net Sales Price.”

Tip: list exact SKUs or product families in an exhibit. A higher rate can reward technical selling or greenfield demand creation, but test it against gross margin and the support you provide.

Core clauses every agreement needs

• Authorization and territory. Grant the authority to sell, then define the territory precisely: states, counties or ZIP codes, industries, or named accounts, and whether it’s exclusive. “The West Coast” isn’t a definition.
• Commission and payment. State the basis (revenue, gross margin or flat fee), the earning trigger (signature, invoice or customer payment) and the exact payment timing.
• Reporting and responsibilities. The rep keeps records and reports pipeline; the company provides accurate sales data, training, materials and notice of price or policy changes.
• Term and termination. The duration, renewal, notice period, termination for cause, and the post-termination commission window.

Choosing a commission structure

• Straight commission: no base, simple, maximum incentive; can mean income volatility for the rep.
• Tiered: the rate rises at set sales levels. Model marginal vs. retroactive tiers in the commission calculator.
• Gross margin: pays on profit, which discourages discounting where costs vary.
• Territory volume: pays a team on a region’s total, encouraging collaboration on complex sales.

Common pitfalls and how to avoid them

• Vague earned vs. paid definitions. Say exactly when commission is earned (for example, on receipt of full and final customer payment) and when it’s paid.
• Unrealistic quotas. If most of the team misses quota, test the target, territory design, enablement and crediting rules before blaming individuals.
• No chargeback policy. Explain how commission on returned or cancelled sales is recovered, for example from the next statement, to the extent the law allows.
• Forgotten house accounts. Attach a schedule naming every house account so the commissionable territory is clear from day one.

Independent rep agreements vs. employee commission plans

An independent manufacturers’ rep is a separate business, usually paid only commission and often carrying several complementary lines. An employee commission plan describes variable pay for someone on your payroll and sits alongside their employment agreement. Commission paid to employees is generally treated as wages, so state wage-payment rules, payroll timing and final-pay requirements apply. The builder supports both: choose the relationship in the first step and the wording changes throughout.

Download a complete template, or copy a clause

Prefer to start from a full document? Download an ungated Word or PDF template, or copy individual clauses below. The builder above is faster when you already know the commercial terms.

Legal review required: these are educational starting points, not legal advice. State wage laws and independent-contractor rules vary, so have qualified counsel adapt the agreement before signature.