An organization’s compensation agreement, or commission policy, outlines a rep’s incentive compensation package and usually requires signatures from both leadership as well as the individual contributor. This step shows an acknowledgment and agreement between the employer and the employee.
You should always have a compensation agreement in play when you’re paying employees variable pay. Plus, in some states, such as California and New York, compensation agreements are mandated by law.
Compensation agreements should include the following:
- The name of the company and the individual
- The start and end dates of the agreement
- The individual’s job title and responsibilities
- The commission rate
- The sales goals that must be met in order to earn commissions
- The process for calculating and paying commissions
- Clawback clause
- The terms for termination of the agreement
Anytime you make a change or issue a new compensation plan, it is good practice to issue a new compensation agreement for signature. This will protect the organization as well as the employee from potential compensation disputes.
To run the sign-off process, use QuotaPath’s in-app Plan Verification tool.
How to write a compensation agreement:
Now, to create a compensation agreement, outline the commission structure and when and how reps receive commissions. Be sure to include your clawback claus if applicable.
Feel free to borrow one of our free downloadable compensation agreement templates the next time you have to draft one: