Does anyone have a prototype of a outside sales commission agreement for an independent sales agent?
Jeffrey, here’s a free generic
"Sample Sales Commission Agreement"
You might also want to take a look at this free white paper from Proformative's vast library titled,
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I hope that helps!
Make sure that whatever agreement you have does not lead to some of the mistakes I've seen in the past.
On more than one occasion, I’ve seen agreements that were contrary to employment law, which only then served as evidence of illegality.
I've also seen situations where a sales manager exceeded the amount owed per the agreement, which she thought was a motivational reward. It turned out that the excess commission only served to cause division and claims of favoritism to the point of discrimination. As in, "this person was capriciously paid more and the other person wasn't and why is that?" Of course, that was not a problem with the agreement, but more of a management problem.
I’ve also seen situations where a previously well-compensated salesperson was given a new contract on a take it or leave it basis that was dramatically worse than the existing agreement. The employer says “take it or leave it” and the employee/employer start to argue over which sales were under which agreement.
Even such items as changes to sales targets and when those changes occurred are causes of endless hassles. Under one interpretation, the salesman feels she was on-target until the target was raised. Then, falling short of the new target changes the compensation.
Finally, when commissions are paid and how long the employer has can be one thing in law, another in an agreement and yet another in practice.
I would suggest you get an attorney to read whatever template you find, just to make sure it is complete and in compliance with your states employment laws.
Then, I would suggest paying close attention to it. If you find it is wrong, change it, but don’t just assume that going off-script is okay.
That’s what I’ve seen. I’m sure there are many other pitfalls.
Define every term so there is no misunderstanding or interpretations that will not be in your favor should it go to court.
Run exhaustive scenario's to make sure the company is always making a profit at the minimum or better percentage; on every product that the agreement covers. Nothing like losing money, unless you prohibit commissions below a threshold in the contract.
Similar to what has also been suggested, make sure that the commission agreement does not cross the line (from independent contractor to employee). Also, check industry standards so your commission rate is not out of line. And it better still allow you to be profitable for all products.
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