What is a Commission Agreement?

It is used by employers, executives and sales teams who want the terms recorded before work starts or money changes hands, rather than reconstructed from memory afterwards. Putting it in writing is what turns an understanding into something either side can rely on.

19 details are captured across 6 areas: parties and contact details, payment and financial terms, dates, timing and duration, role and working arrangements, confidentiality and intellectual property, and legal protections and risk. Together they fix what the employer owes the employee, measured in performance periods rather than in adjectives.

The recurring failure in this kind of arrangement is commission earned on a deal that closed the week after someone left. Employment paperwork is more heavily regulated than most contracts. Getting worker classification, overtime eligibility or final-pay timing wrong exposes an employer to back pay, penalties and interest.

The preview updates live as you complete each field, so you can review the exact language before downloading it as PDF or Word. Treat the result as a well-organised first draft: sound in structure, but worth an attorney's review where the sums involved are significant or the situation is unusual.

What matters most in a commission agreement

Tax treatment is complex

Equity awards carry significant and timing-sensitive tax consequences that vary by instrument and jurisdiction. Recommend independent tax advice expressly.

Discretionary means discretionary

If a bonus is genuinely discretionary, say so consistently. Repeated payment of a 'discretionary' bonus can create an expectation that becomes contractual.

Vesting and leaver provisions

State the vesting schedule, any cliff, and what happens on resignation, dismissal for cause and dismissal without cause. These differ and each should be addressed.

When you need a commission agreement

  • When the counterparty is new to you: With no track record between the parties, the written terms do the work that familiarity would otherwise do. That is exactly when precision pays for itself.
  • When the arrangement will repeat: For a relationship that runs across several jobs or periods, agree the standing terms once and let each instance sit under them rather than renegotiating from scratch.
  • When sensitive information is shared: Confidentiality terms should be signed before disclosure, not after. Information already shared without protection is very difficult to claw back.
  • When the parties are in different places: Naming the governing law and the forum in advance prevents a costly preliminary fight about where any dispute is even heard.
  • When commission earned on a deal that closed the week after someone left is a realistic prospect: If this is the way the arrangement usually goes wrong, it belongs in the document. Allocating that risk in advance is much cheaper than allocating it afterwards.
  • When more than one person is involved: Where several people share the obligation, the commission agreement should say whether they are liable together, separately, or both. That single word decides who can be pursued for the whole amount.

What to include in a commission agreement

This generator collects 19 details. Here is what each group covers and why it matters when the document is relied on.

Parties and contact details

Everything else in the document hangs off these names: the employer carries the obligations, the employee carries the payment, and both need identifying precisely enough to be found later.

Employer Name
The legal entity employing the worker. This determines who is liable for wages, tax withholding and statutory obligations.
Employer Address
The employer's principal place of business.
Employee Name
The employee's full legal name as it appears on payroll and tax documentation.
Employee Address
The employee's home address for payroll records and formal notices.

Payment and financial terms

Payment terms are relied on more often than any other clause and left vague more often than any other clause. State the amount, the trigger, the deadline and what follows a late payment.

Compensation
The salary or wage rate, expressed per year or per hour, together with any bonus or commission arrangement.
Pay Frequency
How often wages are paid. State law often dictates minimum pay frequency, so check the rule for your state.

Dates, timing and duration

These dates decide when obligations start, when they end, and when someone is in breach. Each payment date in particular should have a date and a test attached to it.

Effective Date
The date the agreement takes effect. This can differ from the signature date, and it is the date obligations start running from.
Start Date
When performance begins. Tie this to a calendar date rather than a vague trigger such as 'on approval'.
Notice Period
How much warning a party must give before ending the agreement, and how notice must be delivered to count.

Role and working arrangements

Role, hours and reporting lines drift over time. Where practice has moved away from what is written here, reissue the document rather than relying on a version that no longer describes the job.

Job Title
The role title and where it sits in the organisation.
Department
The team or business unit the role belongs to.
Reporting Manager
The person the employee reports to day to day. Naming the role rather than only the individual avoids the clause going stale after internal moves.
Work Location
The primary place of work and whether remote or hybrid working is permitted.
Working Hours
Expected hours and days, plus overtime treatment. Misclassifying an employee as exempt from overtime is a frequent and expensive error.
Benefits
Health cover, retirement contributions, paid leave and any other benefits, plus who is eligible and when entitlement begins.
Probation Period
The initial review period, what is assessed and what notice applies during it.

Confidentiality and intellectual property

Signed before disclosure, these clauses work. Signed afterwards, they are an attempt to claw back information that has already gone.

Confidentiality Obligations
The duty to keep information private, who it may be shared with internally, and the standard of care required.
Intellectual Property Obligations
The employee's duty to assign inventions and work product created in the course of employment.

Legal protections and risk

Naming the governing law and the forum here avoids a preliminary fight about where a dispute over the incentive plan is even heard.

Governing State
The state whose law governs the agreement. Choose a state connected to the parties or the work, as a wholly unconnected choice may not be respected.

Completing this commission agreement

Reviewing it against what actually happens

Arrangements drift. If the way the employer and the employee work together has moved away from the wording, reissue the document rather than relying on a version that no longer describes reality.

Making the counts checkable

Where the price depends on performance periods, keep a contemporaneous record as they are delivered. A count reconstructed at invoice time invites a challenge that a running record would have prevented.

Signing and keeping it

Every party named should sign and date, and each should keep their own copy. Electronic signatures are valid for the great majority of agreements — retain the audit trail showing who signed and when.

Defining each payment date

Say what has to be true for each payment date to have happened and who confirms it. An undefined completion test is the reason obligations sit open long after the work is finished.

Dates that drive obligations

Use calendar dates rather than relative triggers such as "on approval", which cannot be measured. Dates determine when obligations start, when they end, and when someone is late.

Common mistakes to avoid

  1. Not planning for commission earned on a deal that closed the week after someone left. This is the failure that recurs in this kind of arrangement. Name it in the agreement and say who carries the cost when it happens, because working it out afterwards means negotiating from a weak position.
  2. Missing final pay deadlines. Many states require final wages within a set number of days of termination, sometimes immediately. Penalties for missing the deadline can exceed the wages owed.
  3. Letting the incentive plan change without repricing. Where the scope of the incentive plan moves, the price and the timetable should move with it. Absorbing the first few changes sets the expectation that all of them are free.
  4. No route out. Agree how the arrangement ends while the employer and the employee still get on. Exit terms negotiated during a dispute rarely favour anyone, and they cost far more to settle.
  5. Treating each payment date as self-evident. State exactly what has to be true for each payment date to have been reached, and who confirms it. Without a test, one side thinks the obligation is discharged while the other is still waiting.

How to use this commission agreement generator

  1. Fill in the form. Fill in the 19 fields, starting with the parties. Have the written calculation the payment is based on to hand before you begin, because several of the entries will be taken directly from it. Nothing is sent to a server — the document is assembled in your browser.
  2. Read the preview. The preview updates as you type and is editable, so you can adjust the wording before downloading — useful where commission earned on a deal that closed the week after someone left needs a sentence of its own that the standard clauses do not cover.
  3. Download and sign. Download the PDF for signature, or the Word file if you want to keep editing. Every party should sign, date and keep a copy — including whatever covers whether commission is owed on orders shipped after termination.

Commission Agreement — frequently asked questions

What happens to unvested equity if the employee leaves?

Unvested awards are normally forfeited, while vested options typically must be exercised within a limited window after departure — often 90 days — or they lapse. Good-leaver and bad-leaver provisions can change this substantially. Because the tax consequences of exercising are significant and time-critical, employees should take independent advice well before the window closes.

What records should I keep alongside the commission agreement?

The written calculation the payment is based on, the signed document itself, and a contemporaneous note of anything agreed afterwards. Most disputes turn on what was agreed at the time, and the party who can produce a dated record is the party who wins that argument.

Who should sign the commission agreement?

The employer and the employee, through someone with authority to bind them. Where either is a company, that means a director or an officer with delegated authority — a signature from someone without it is a defence waiting to be raised.

Which state's law should govern this commission agreement?

Choose a state with a genuine connection to the parties or the subject matter — where a party is based, or where the work or property is located. A choice with no connection at all may not be respected, and for property or employment the local state's rules will often apply regardless of what the contract says.

How long do the confidentiality obligations last?

Ordinary commercial information is usually protected for a fixed period of two to five years after the agreement ends, while genuine trade secrets are often protected for as long as they stay secret. Whichever you choose, state expressly that the confidentiality clause survives termination — otherwise the protection ends with the contract.

How is notice properly given under this agreement?

Follow the notice clause exactly: use the stated method, send it to the address named in the agreement, and keep proof of delivery. Notice given informally — a text message, or an email to the wrong person — is frequently challenged, and a defective notice can leave the agreement running on.

Can employment terms be changed later?

Not unilaterally. A material change to pay, hours or duties normally needs the employee's agreement, recorded in a signed variation or a fresh agreement. Imposing changes without consent risks a constructive dismissal claim.

Does this agreement override state employment law?

No. Statutory rights on minimum wage, overtime, leave and discrimination apply regardless of what the contract says. A clause that undercuts them is unenforceable to that extent, and the rest of the agreement usually survives.