Free Commission Agreement Template

A commission agreement is a written contract that explains how and when a person earns commission-based pay. It’s commonly used when compensation depends on performance, such as closing sales, generating leads, or making referrals.

This agreement helps both sides understand exactly how commission works, which reduces disputes and builds trust. It’s often used alongside broader contracts, such as an employment contract or an independent contractor agreement.

A commission agreement typically applies to:

• Sales representatives and account managers.
• Independent contractors or consultants.
• Referral partners or affiliates.
• Anyone paid partly or entirely based on results.

A strong commission agreement leaves little room for interpretation. These are the sections that matter most.

Parties and Relationship

Start by identifying the party paying commission and the person earning commission. Then clarify whether the relationship is employment or independent contracting.

Commission Structure

Clearly explain how commission is calculated, including:

• The commission rate (percentage, flat fee, or tiered structure).
• What triggers commission (closed sale, collected payment, signed contract, etc.).
• Whether commission applies to new sales, renewals, or referrals.

Payment Timing and Method

State:

• When commission is paid (monthly, quarterly, after payment is received).
• How it’s paid (payroll, direct deposit, check).
• Whether commissions are paid after refunds, chargebacks, or cancellations.

Territory, Clients, or Accounts

If applicable, define:

• Assigned territories or regions.
• Specific accounts or customer types.
• Any exclusivity or non-exclusivity rules.

Deductions and Adjustments

Explain how you handle:

• Returns or refunds.
• Chargebacks.
• Unpaid invoices.

Term, Termination, and Post-Termination Pay

Include when the agreement starts and ends, how either party can terminate it, and whether commissions are paid after termination.

If you need to formally end the relationship later, a termination letter or a notice of contract termination can help document that step.

Use these steps to create a commission agreement that is clear, fair, and easy to follow.

Step 1 – Identify the Parties and Relationship

List the full legal names and addresses of both parties. Then clarify whether the person earning commission is an employee or an independent contractor.

Step 2 – Define How Commission Is Earned

Explain exactly what actions earn commission. For example, you might pay commission for closing a sale, bringing in a qualified lead, or referring a customer who completes a purchase.

Also note whether commission is earned when the sale is signed or when payment is received.

Step 3 – Set the Commission Rate and Formula

State the commission rate clearly and show how it’s calculated. If you use tiers or bonuses, explain when higher rates apply.

Step 4 – Explain Payment Timing and Adjustments

Describe when commission is paid and how refunds or chargebacks affect payouts. If commissions are delayed until payment clears, say so directly.

Step 5 – Add Termination and Dispute Terms

Include how the agreement can end and what happens to unpaid commissions. You may also outline how disputes are handled, such as through negotiation or mediation.

Step 6 – Review, Sign, and Store

Review the agreement for clarity. Then have both parties sign and keep copies for their records.

A commission agreement is useful any time pay depends on results. Common situations include:

• Hiring a sales representative.
• Working with referral partners.
• Paying contractors based on performance.
• Offering incentive-based compensation.

If you’re also defining broader job duties, pairing this document with an employment contract or an independent contractor agreement keeps everything organized.