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Free agreement template · Word

Sales Commission Letter

A sales commission letter sets out the percentage commission an employee earns on each sale or deal they close, defining when commission is earned, when it is paid, how cancellations are handled and what happens to pending commission on exit. Unlike a target-slab incentive, it pays a rate on every rupee of qualifying sales.

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Preview of the agreement

[Highlighted] = fill in
[Company Logo][Company Name]

SALES COMMISSION LETTER

Ref. No.:
[Reference Number]
Date:
[Date]

To,
[Employee Name]
Employee ID: [Employee ID]
[Designation], [Department]

Subject: Sales Commission Terms Effective [Effective Date]

Dear [Employee Name],
In addition to your fixed salary, you will be eligible for sales commission on the terms below, effective [Effective Date].

Product / Deal TypeCommission RateBasis
[Product / Service 1][Percentage]%Net invoice value excluding GST
[Product / Service 2][Percentage]%Net invoice value excluding GST
Renewals / Repeat Orders[Percentage]%Net invoice value excluding GST
Shared DealsSplit [Percentage]% / [Percentage]%As recorded in CRM before closure
  1. Qualifying sale: an order recorded in [CRM Name] under your name, invoiced by the company, at approved pricing.
  2. Earning: commission is earned only when the customer payment is received in full.
  3. Payment: commission earned in a month is paid with the salary of the following month, along with a statement.
  4. Clawback: if an order is cancelled or refunded within [Number] days of payment, the commission paid on it will be adjusted against future commission.
  5. Exit: commission on payments received up to your last working day will be settled in your full and final settlement; amounts received thereafter are not payable.
  6. Changes: the company may revise rates for future periods with [Number] days' written notice; earned commission will not be affected.

Commission is subject to TDS. Please sign below to confirm you have read and accepted these terms.

Regards,

For [Company Name]
[Authorised Signatory]
[Designation]
Accepted by
[Employee Name]
Date: [Date]

What this template includes

  • Commission rate by product or deal type
  • Definition of qualifying sale
  • Earned-on-collection rule
  • Clawback on cancellation or refund
  • Payment cycle
  • Treatment of pending commission on resignation

When to use it

  • Real estate, insurance, auto or B2B sales roles paid on deal value
  • Account managers earning commission on renewals
  • Hybrid roles with low fixed pay and high commission
  • Formalising commission for a salesperson previously paid informally

How to customise this template

  1. 1Fill a rate table for each product or deal category
  2. 2Define 'qualifying sale' in terms that match your CRM
  3. 3Set the clawback window
  4. 4Specify a split rule for shared deals

HR tips

  • Pay commission only on realised revenue to protect cash flow
  • Settle shared-deal splits in writing before the deal closes
  • Provide monthly commission statements
  • Review rates yearly, with notice for changes

Commission terms form part of the employment contract. Review clawback, set-off and exit clauses against applicable wage law and with a legal adviser.

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Frequently asked questions

What is the difference between commission and incentive?+

Commission is usually a fixed percentage on each sale, while an incentive is often paid on reaching target slabs over a period.

Is commission paid after resignation?+

It depends on the agreement. Many letters pay commission on deals collected up to the last working day and forfeit the rest.

Can commission be recovered if a customer cancels?+

Yes, if the letter includes a clawback clause for cancellations or refunds within a defined period.