A compensation policy, or commission agreement, documents and details a rep’s incentive compensation package. It calls for signature from both the employer and the individual to show mutual understanding.
We recommend every organization issue a compensation policy when you pay salespeople variable pay, although it is only mandated by law in California and New York.
Your compensation policy should include:
- Name of the company and the sellers
- Start and end dates of the agreement
- Individual’s role title and responsibilities
- Commission rate
- Sales objectives that must be met in order to earn commissions
- Process for calculating and paying commissions
- Clawback clause
- Terms for termination of the agreement
We recommend sening a compensation policy out for a signature anytime you make a change to your sales compensation plan. And to help you manage this sign-off process, we built an in-app feature called Plan Verification that distributes and hosts your documents in QuotaPath.
How to write a compensation policy:
When writing a compensation policy, be sure to include the commission structure and when and how reps are paid. Include your clawback clause if applicable.
Download our sales compensation policy templates available below to customize for your organization: