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Free sales commission agreement template (Word)

Reviewed by Clausery editors · · 3 min read

An agreement between a company and a sales representative (employee or independent) defining commission structure, quotas, territory, when commissions are earned/paid, clawback rules and termination terms.

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A sales commission agreement spells out how sales reps earn commission: base salary (if any), commission rate per deal, quotas, territory, when commission is considered earned (on booking, on invoice, on customer payment), draw vs recoverable draw, clawbacks for refunds/chargebacks, and what happens on termination.

Clear commission terms prevent disputes over who gets paid on which deal and when. Be explicit about whether commissions survive termination, and how splits work on team or channel deals.

What to include#

  • Company and rep. Company name; sales rep name and role (employee or independent contractor); effective date; territory (geographic, vertical, named accounts).
  • Compensation. Base salary (if any) and commission structure: % of revenue/gross margin, tiered/accelerating rates above quota, bonuses/SPIFs, draw (recoverable or non-recoverable) if any.
  • Quota and targets. Monthly/quarterly/annual quota, how quota is set/reset, ramp-up periods for new reps, and territory/product assignment.
  • Earning and payment. When commission is earned (booking, invoicing, customer payment), payment timing (next payroll after close), splits between reps/teams, and clawback for cancellations/refunds/non-payment.
  • Term and termination. Agreement term, at-will status, what happens to commissions on deals in pipeline at termination (often none post-termination except for deals closed before end date), non-solicit/non-compete if applicable, and governing law.

How to fill it in#

  1. Step 1: Pick a clear commission formula

    Avoid vague 'commission will be paid per company policy' — state the exact % and basis (revenue or margin).

  2. Step 2: Define 'earned' precisely

    Commission earned on close vs customer payment has big cash-flow implications; choose a policy and stick with it.

  3. Step 3: Add clawback terms

    If a customer refunds or doesn't pay within a set window, claw back the commission — state clearly.

  4. Step 4: Spell out post-termination

    Most states require paying commissions earned before termination; future pipeline deals do not usually earn unless contract says so.

  5. Step 5: Review with counsel

    Commission disputes are common — especially post-termination. Make sure terms comply with state labor/commission laws (CA, NY and IL have specific rules).

Employment agreement

Base employment contract often paired with this commission plan.

Independent contractor agreement

For independent (1099) sales reps.

Retainer agreement

Retainer differs from commission-based pay.

Free HR/sales templates

Full sales/HR template set.

Questions

Are commissions owed after termination?

Many US states require paying earned commissions post-termination; clauses that say 'no commission after termination' are unenforceable in CA, NY, IL and others for deals closed during employment.

Can I claw back commissions?

Yes for refunds/non-payment if agreed in writing; clawbacks on paid/customer-retained revenue are restricted.

Draw vs guarantee?

A recoverable draw is a loan against future commissions (repaid from later earnings); a non-recoverable draw/guarantee is paid regardless (essentially a guaranteed minimum).

Should I pay on revenue or margin?

Margin-based commissions discourage discounting; revenue-based is simpler; be explicit.

Do I need quotas?

Quotas focus reps and trigger accelerators; always state how and when they are reset.

Browse all templates →

These are general templates, not legal or tax advice. Have anything unusual reviewed for your jurisdiction.

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