Every sales team either just wrapped up rolling out a new sales compensation plan or is about to.
That means meetings — and lots of them — to ensure every commissionable rep understands the circumstances of when they are paid, how they earn variable pay, what happens if a contract cancels, and more.
You have to inform leadership. Then leadership typically holds a meeting with the entire sales organization, and individual one-on-ones follow. (For 10 best practices and a complete example compensation communication plan, check out this blog.)
The final step involves putting a formal document in place that outlines the compensation policy and includes signatures of acknowledgment from the rep and the organization.
Get your AE compensation policy template
We’ve seen this legal document called both a commission agreement and a compensation policy. And, it serves to protect the company and the commissionable employee from potential compensation disputes in the future.
In fact, in some states, having a commission agreement in place is mandated by law. See: California and New York.
However, for those who fall outside of those states, we consider this a must-have comp plan best practice as it deepens understanding of your compensation structure and provides a point of reference should questions arise.
Below is an outline of a commission agreement.
How to write a compensation policy
Every commission agreement should include a detailed breakdown of the following:
- On-target earnings (OTE)
- Quota frequency, quota, and on-target commissions
- A commission table with commission rates tied to progress toward quota
- Additional comp plan mechanics that impact commissions rates (such as accelerators and decelerators)
- Payment terms that include when your org. pays commissions
- SPIFs
- Clawback language
- Dispute resolution
- Accrual and payout
- Signature
Write your own, or feel free to download our free AE compensation policy template.
For other compensation resources, visit Compensation Hub for free comp plan templates, or discover our sales compensation calculator and more on our Resources page.
About QuotaPath
QuotaPath automates commission tracking and sales compensation management for scaling GTM teams. Integrate your CRM for real-time, accurate, and transparent commission payouts and communications. Align your teams with a compensation source of truth and motivate your reps by showing how their pipeline translates to earnings.
