Employment
Free Sales Commission Plan Agreement Template
A sales commission plan agreement defining commission rates, when commission is earned, payment timing, clawbacks and what happens when employment ends.
A sales commission plan sets how much commission a salesperson earns, when it is earned and paid, and when it can be recovered. The key question is when commission counts as earned, because state wage laws often protect earned commissions after you leave.
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Template
SALES COMMISSION PLAN AGREEMENT
This Commission Plan ("Plan") is between [COMPANY NAME] ("Company") and [EMPLOYEE NAME] ("Employee") for the period [START DATE] to [END DATE] ("Plan Period").
1. BASE SALARY. Employee's base salary is [AMOUNT] per [year], paid on regular paydays.
2. COMMISSION RATE. Employee earns commission of [PERCENT]% of [Net Revenue / Gross Margin / Annual Contract Value] from Eligible Sales. [Optional accelerator: [PERCENT]% on Eligible Sales above [QUOTA AMOUNT] in the Plan Period.]
3. ELIGIBLE SALES. An Eligible Sale is a sale to a customer in Employee's assigned [territory / accounts: DESCRIBE] that is signed during the Plan Period and credited to Employee under this Plan. Split deals will be credited [DESCRIBE SPLIT RULE].
4. WHEN COMMISSION IS EARNED. Commission is earned when [the customer pays the invoice / the contract is signed / the product is delivered], whichever this Plan specifies. Earned commission will be paid by [the end of the month following the month in which it is earned].
5. DRAW [OPTIONAL]. Employee will receive a [recoverable / non-recoverable] draw of [AMOUNT] per [month] against earned commission. [If recoverable: any unrecovered draw carries forward and is not repayable from Employee's personal funds after employment ends, except as allowed by law.]
6. CHARGEBACKS. If a customer cancels or receives a refund within [NUMBER] days after payment, commission paid on that amount will be deducted from future commissions, to the extent permitted by law. No deduction will reduce Employee's pay below minimum wage.
7. QUOTA AND TERRITORY CHANGES. The Company may change quotas, territories or rates for future periods with at least [30] days' written notice. Changes will not reduce commission already earned.
8. END OF EMPLOYMENT. If employment ends for any reason, Employee will be paid all commission earned through the last day of employment, and commission on Eligible Sales signed before that day and paid within [NUMBER] days after it [delete if not intended], in line with applicable state law.
9. DISPUTES. Employee will raise commission disputes in writing within [60] days of the relevant statement. The Company will provide monthly commission statements showing the calculation.
10. GOVERNING LAW. This Plan is governed by the laws of [STATE]. Where state law requires a written commission agreement, this Plan is that agreement, and a signed copy will be given to Employee.
GENERAL PROVISIONS
(a) Notices. Notices must be in writing and sent to the addresses or emails above (or as later updated by notice). Email notice is effective when sent, unless the sender receives a delivery failure message.
(b) Entire agreement. This agreement, with any schedules and exhibits, is the entire agreement between the parties on its subject and replaces all prior discussions and agreements on that subject.
(c) Amendments and waivers. Changes must be in writing and signed by both parties. A failure or delay in enforcing any term is not a waiver of it.
(d) Severability. If any provision is found unenforceable, it will be limited to the minimum extent necessary and the rest of this agreement will remain in effect.
(e) Assignment. Neither party may assign this agreement without the other party's written consent, except to a successor in a merger or sale of substantially all of its business, on notice.
(f) Relationship. Nothing in this agreement creates a partnership, joint venture or agency relationship unless expressly stated.
(g) Counterparts and electronic signatures. This agreement may be signed in counterparts and by electronic signature, each of which is an original and together form one agreement.
(h) Independent advice. Each party has had the opportunity to review this agreement with its own legal counsel and signs it voluntarily.
COMPANY: ______________________ Date: __________
EMPLOYEE: _____________________ Date: __________
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This free template is provided by ClauseAudit for general informational purposes and is not legal advice. Have it reviewed before use. Replace all [BRACKETED] placeholders.When to use this template
- A company is hiring or managing salespeople paid partly on commission.
- A salesperson wants to understand or negotiate their comp plan.
- In states that require commission plans to be in writing, such as California and New York.
How to fill it in
- Set the base salary and the commission rate and measure (revenue, margin or contract value).
- Define eligible sales and how split deals are credited.
- Choose exactly when commission is earned: on signing, delivery or payment.
- Decide whether there is a draw, and if so whether it is recoverable.
- Set chargeback rules and a time limit.
- Decide what happens to commission on deals that close after employment ends.
Key clauses to check
- When commission is earned
- This decides what you are owed if you leave, and state wage laws often protect earned commission.
- Chargebacks and clawbacks
- Should have a time limit and not reduce pay below minimum wage.
- Plan changes
- Changes should apply only going forward, with notice.
- Post-termination commission
- The most common dispute; spell it out.
State-specific notes: CA, TX, NY, FL, IL
Employment rules that affect this template in the five largest states, summarized as of 2025. Laws change and cities add their own rules, so confirm the current law before signing.
California
- Final wages are due immediately on termination, and within 72 hours if an employee quits without notice (immediately with 72 hours’ notice). Late payment triggers waiting-time penalties.
- Commission plans must be in writing, explain how commissions are computed and paid, and be signed with a copy given to the employee (Labor Code §2751).
Texas
- Final pay is due within six calendar days after a discharge, and by the next regular payday after a resignation.
- Commissions are wages under the Texas Payday Law once earned under the plan’s terms, so define clearly when commission is earned.
New York
- Final wages are due by the next regular payday after separation.
- Commission salespeople must have a written agreement describing how commissions are calculated and paid, including after employment ends (Labor Law §191).
Florida
- Florida has no specific final-paycheck deadline or vacation payout statute; the employer’s policy and agreement control.
- Earned commissions are generally recoverable as wages under the plan’s terms; define when commission is earned.
Illinois
- Final compensation, including earned vacation, is due by the next regular payday after separation.
Another state? See the rules for all 50 states and DC.
Frequently asked questions
Do I get commission after I quit?
You are generally entitled to commission already earned under the plan, and state wage laws often protect it. Whether you are paid on later deals depends on the plan's terms.
Is a commission plan required to be in writing?
Several states, including California and New York, require written commission agreements.
Can my employer change my commission plan?
Usually for future periods with notice, but not to take away commission already earned.
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This free template is general information, not legal advice, and is no substitute for a qualified attorney. Laws vary by state; have it reviewed by a lawyer before you use or sign it.